Posted by
michael engmann on Tuesday, September 30, 2008 1:44:55 AM
I've been in the financial markets 40 years and can't understand why Congress couldn't come up with a plan that satisfied the American
public. The public is tried of getting screwed by greedy corporate executives and corporate giveaways. Warren Buffet's deal with
Goldman Sachs is the perfect example of what the government should do. Instead of buying mortgages with questionable market
value, the government should buy convertible preferred stock infinancial institutions that have mortgage problems. The conversion
price of the preferred should be based approx. on the market capitalizationof the financial institution that needs money. For example - if a bank had a market cap. of $10B and needed to borrow $30B, the government would buy $30B of convertible preferred and would own approximately 75% of the financial institution. Since the debt holders and other creditors such as money market funds, CD holders, and depositors would have a senior position to the preferred, they would be protected. These creditors had no say in the bad management decisions that led to this crisis. And, with voting power control of the company, the government could determine salaries and who should be hired and fired. The benefit of this plan is that the government would own a going concern with more value than just bad mortgages. In addition, the government would not need to create another large bureaucracy to manage $700B in mortgages. I believe the American public would want a plan like this. I have mentioned this to a number of individuals who were against a bailout but would be satisfied with a plan like this. What do you think?