“Let me issue and control a nation’s money, and I care not who writes its laws.” -Nathan Rothschild, 1838
We are being robbed blind. Yes, the credit markets are falling apart and emergency action is needed, but the terms of this new deal are staggeringly unfair and a blatent attempt to continue to hide the bad actors and cover-up the magnitude of their criminal behavior. From Clusterstock:
The senior preferred shares will pay a cumulative dividend rate of 5 percent per annum for the first five years and will reset to a rate of 9 percent per annum after year five… The senior preferred shares will be callable at par after three years. Prior to the end of three years, the senior preferred may be redeemed with the proceeds from a qualifying equity offering of any Tier 1 perpetual preferred or common stock… Treasury will receive warrants to purchase common stock with an aggregate market price equal to 15 percent of the senior preferred investment.
Compare that deal to the terms that Warren Buffett extracted from Goldman Sachs just a few short weeks ago. Henry Paulson rolled us over for the big guys.
Goldman Sachs pays a fat dividend to Berkshire Hathaway of 10% on $5 Billion dollars — that’s $500 million per year. And, since this is a preferred, it gets paid out of net income in after tax dollars dollars… Goldman gets the right to call the preferred at any time at a 10 percent premium. Ouch again. Buffett gets $5 billion worth of warrants with a strike price of $115, or about 43.47 million shares. The warrants are good for only 5 years.
The world has been presented with an unprecedented chance to unwind the biggest pyramid scheme of all time, but we are squandering it to protect the crony capitalist enterprise that our government / finance industry has become. This new $250B boondoggle isn’t going to fix the problem. In fact, it isn’t intended to fix the problem. Through the magic of fractional reserve lending, banks can leverage this ‘new money’ up 10:1 (or possibly more, since the TARP legislation included a clause for zero reserve), this will result in a massive dilution of the dollar. My only question is, who do these guys think the banks are going to lend to? The american consumer is broke.
Citizens, the global PTB just agreed to inflate the hell out of our money supply to staunch the bleeding, and the US deal stinks. And we still don’t know who is solvent among these banksters (if anybody). Until we can answer that question, the real cost of this endeavor is unknowable (and perhaps that is the point of the cover-up). Can you say currency crisis?
Agreed. We still won’t know who’s solvent and who’s not, we won’t have voting rights on these shares and we won’t have a seat on the boards. We won’t even regulate executive compensation.
I believe Paulson used the word “distasteful” today to describe the deal he struck. But I didn’t hear another word Paulson should have used which is transparency. When asked directly last on CNBC’s Fast Money, a Treasury spokesman stated flatly that this new money comes with no requirements that it be lent out. Not to business or individuals. But the spokesman said it would be “ludicrous” for the banks to sit around and hoard it. Another lovely word.
October 14th, 2008 at 9:00 pm
Yep. Paulson and co. would love for americans to believe that the banking industry execs are simply repulsed by the idea that they have to accept hundreds of billions of $ of public money, while being allowed to remain at their posts with apparently no government oversite as to what they do with the new found wealth. What they don’t want us to think about is that these bailouts aren’t the exception to crony capitalist systems, but the norm caused by the moral hazard dilemma.
October 15th, 2008 at 11:59 pm