Revised bailout plan is much better for taxpayers

Bankers and their US Treasurer stooge, Paulson, had schemed for taxpayers to bail them out by paying above market prices for their worst “mortgage-back securities (“assets”). Now that the Western European governments had taken the lead in taking equity for recapitalizing their banks, the US government felt more at ease to follow suit with as much as $250 billion. Paulson conceded to the equity stake plan only to get money into the banks faster.

To begin 9 U.S. banks will get a total cash infusion of $125 billion. It’s a good deal for taxpayers. No one pays a lower rate for the cost of capital than the federal government (the US pays low interest rates for issuing Treasuries). Since this will result in positive cash flow, I’d call this an investment for taxpayers. This investment will provide a dividend yield of 5% for the first 5 years and 9% thereafter on Preferred Shares. Banks are projected to be more financially stable in 5 years to buy back the Preferred Shares rather than pay the 9% dividend.

All is not great about the revised plan, however. The Bush Administration still intends to buy $100 billion of those worst mortgage-backed securities. You didn’t think Wall Street wouldn’t get its “cake and eat it too”, did you?


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One Response to “Revised bailout plan is much better for taxpayers”

  1. pastamanvibration Says:

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