No Equity Stake, No Deal!
Well, it’s not quite “no justice, no peace” but I think it works as a slogan.
The point is that financial institutions that want some rescuing from the taxpayers ought to be forced to hand an ownership stake over to the taxpayer that’s proportion to the amount of rescuing they get. That way if the companies themselves experience a post-bailout revival, the taxpayer owns a piece of that upside and we get back the money we spent on the shitpile — or even more. The way the Bush/Paulson plan works, we only get our money back if it turns out that all these “toxic assets” are, secretly, actually pretty good assets. On the one hand, the Bush/Paulson bet isn’t a very good bet. But on the other hand, there’d be no reason to take that bet even if the odds were somewhat better. The public has all the leverage here; only a hare-brained opposition to punishing malfeasance justifies a refusal to make the demand.
35 Responses to “No Equity Stake, No Deal!”
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September 23rd, 2008 at 1:42 pm
Interesting, since the conservative philosophy is generally considered to be about personal responsibility and punishing those who sin/cheat/mooch. Based on that logic, you would think this would be politically unpopular among the base.
September 23rd, 2008 at 1:46 pm
I think the meter needs some adjusting. “Equity Stake Or Jump In The Lake” is my suggested revision.
September 23rd, 2008 at 1:52 pm
Report: Administration official suggests administration has been planning this bailout for “months”, intentionally only giving lawmakers a few days because “that should be enough”:
H/T Digby, Emptywheel, from Roll Call:
Hurry! Hurry! Give Lord Chancellor Hank 3/4 of a trillion by Friday or the economy gets it! Mushroom cloud!
September 23rd, 2008 at 1:52 pm
here’s another way these fuckers are lying to us:
for years, the conservative mantra was that all governmental involvement in the economy was a mistake, because it was less likely to have good information than the market is.
government should not invest in wind-power! government should not invest in solar! the market knows where the opportunities are, and the market will find them, and direct the nation’s investment to the most likely sources of future profit.
it’s the old epistemic argument for the free market, see hayek ad nauseam.
now all of a sudden the right-wingers are telling us this:
there’s a huge shitpile of assets that the market says are worthless.
but our government knows better! uncle hank and uncle ben know far better than that stupid old market does, and they’re going to snatch up some bargains that the market doesn’t see!
’cause government is so good at spotting investment values! and the market is so bad at it! so sign on to our plan NOW NOW NOW!!!!
un-fucking-believable. a total, ideological 180 degree turn from the right-wingers. we have always been at war with the market’s pricing decisions.
September 23rd, 2008 at 1:52 pm
These institutions committed fraud when they marketed their MBS backed by sub-prime loans as AAA and sold them all over the world. AIG was a prime participant as they provided credit default insurance that purported to make these securities AAA. I believe our foreign creditors demanded to be made whole for this fraud and the solution was devised to have the US government step in as the guarantor of these securities in order to keep the fraud quiet. The cost of this action should be borne in the main by the institutions that committed the fraud and already collected the fraudulent issue price. Punitive action on the executives should also ensue.
September 23rd, 2008 at 2:01 pm
Free markets need $700 billion (or whatever). Freedom isn’t free. Haven’t you heard?
September 23rd, 2008 at 2:02 pm
The point is that financial institutions that want some rescuing from the taxpayers ought to be forced to hand an ownership stake over to the taxpayer that’s proportion to the amount of rescuing they get.
Outright nationalization: take crappy assets off bank books and move them onto fed books. Inject cash to to move bank balance sheets into the black. Privatize banks.
Paulson plan: trade a lot of cash for shitty assets to move bank balance sheets into the black.
The difference between the two is that under the Paulson plan, the shareholders and the CEOs remain in charge, yes?
max
['So why worry about a stake, when we can just have it all?']
September 23rd, 2008 at 2:03 pm
Krugman 2016.
September 23rd, 2008 at 2:09 pm
It was suggested that Paulson take $150 billion now and come back for more in 1/09….he did not like that idea…he wants all the money now with no strings.
September 23rd, 2008 at 2:21 pm
I say call the bluff. Make 150 Billion available with potential for more if the plan works. Tweek the plan as it moves. Let a few banks fail. End of story. The Bush crisis-panic-fear game is over!
September 23rd, 2008 at 2:40 pm
Another problem with the bailout is that the Treasury does not have the institutional capacity to unwind all of these derivatives. It will need to farm out the work to the same institutions that got us into this mess. This creates the possibility of the whole process being shot through with conflict of interest. Was this problem addressed at the hearings?
September 23rd, 2008 at 2:45 pm
so right, matt.
it’s pretty simple stuff, so obvious that it is amazing that there is any controversy about it at all.
unfortunately, i think the dems are about to get rolled again.
all the signs are there, including the fact that they basically gave away their strongest bargaining point – their willingness to oppose the proposal – before any negotiations began.
republicans are preparing to let dems pass the measure and then they will demagogue them on the issue throughout the last 6 weeks of the election.
before pelosi brings this up for a vote, she should have an iron-clad guarantee that she will have a near-unanimous vote of support from republicans.
unfortunately, i don’t see that happening.
September 23rd, 2008 at 2:46 pm
I prefer “All your banks are belong to us.”
September 23rd, 2008 at 3:10 pm
Yes, this is infuriating.
The U.S. should get an equity stake, no doubt about it, and a huge one. Not only that, but the shares should be issued dilutively, so that the current shareholders own way less and take a material hit to their bottom line
September 24th, 2008 at 4:47 am
Not to be nitpicky, but …
Whom you mean is the Chancellor of the Exchequer (who is Paulson’s counterpart in the UK), not the Lord Chancellor (that would be Michael Mukasey’s).
September 28th, 2008 at 2:22 am
Equity stakes are not a good solution. If the government owns equity in major corporations, they have an incentive to go out of their way to make that company profitable. That’s no different in terms of results than legislators being convinced by lobbyists to pass laws favorable to their industry.
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