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 in
financial institutions that have mortgage problems. The conversion
price of the preferred should be based approx. on the market capitalization
of 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 say you?