U.S. Clears Path to Bank Takeovers
Obama's Revised Plan for Industry Aid Could Result in Nationalization
By Binyamin Appelbaum and David Cho
Washington Post Staff Writers
Tuesday, February 24, 2009
The Obama administration yesterday revamped the terms of its emergency aid to troubled financial firms, setting a course that could culminate with the government nationalizing some of the country's largest banks by taking a controlling ownership stake.
Administration officials said the change, which allows banks to repay the government with common stock rather than cash, is intended to give banks more capital to withstand a continued deterioration of the economy, and not to nationalize the banking system.
But in seeking to bolster investor confidence in troubled companies such as Citigroup, the government said it is willing to acquire large chunks of their shares. .
The move is a significant gamble. The magnitude of the effort could underscore the severity of the crisis, further alarming investors. The government could also forego billions of dollars in dividend payments.
(More here.)
By Binyamin Appelbaum and David Cho
Washington Post Staff Writers
Tuesday, February 24, 2009
The Obama administration yesterday revamped the terms of its emergency aid to troubled financial firms, setting a course that could culminate with the government nationalizing some of the country's largest banks by taking a controlling ownership stake.
Administration officials said the change, which allows banks to repay the government with common stock rather than cash, is intended to give banks more capital to withstand a continued deterioration of the economy, and not to nationalize the banking system.
But in seeking to bolster investor confidence in troubled companies such as Citigroup, the government said it is willing to acquire large chunks of their shares. .
The move is a significant gamble. The magnitude of the effort could underscore the severity of the crisis, further alarming investors. The government could also forego billions of dollars in dividend payments.
(More here.)
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1 Comments:
It’s a huge fiasco. Definitely aren’t seeing promised change but more of the same. With the DOW failing I’ve been watching the precious metals markets with the widget ExactPrice and it looks like a number of those dropping out of the stocks are putting money in gold and silver as a hedge. And given the way the printing presses at the FED are running on full tilt that may not be a bad bet.
What I wish they would do is let the banks fail, cover the FDIC insured accounts and be done with it. It’ll hurt in the short but the long term result is far healthier then what we’re doing now.
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