The more I think about it, the collapsing market value of big US banks may render the brouhaha over nationalization moot.
The government could simply make the following clear
1) There will be no more sweetheart capital injections into the big banks
2) They can be bought by the government at a reasonable premium to current trading price or they can fend for themselves
We can let the shareholders take it from there.
My guess is that they will force management to take the deal. If they don't it is because management can convince the shareholders that the bank can make it own its own.
In this scenario the government probably overpays for Citi for example, since the stock is probably intrinsically worthless and only trades above zero on the possibility of more government injections. However, right now Citi only costs $10B.
While that's not nothing, it may be a small price to pay to avoid a national food fight over whether the government is unjustly seizing private interests.
Once the bank is fully owned by the government it can be recapitalized. Now the government can inject as much money as it wants and all the profit winds up coming back to the government.
In theory we don't even have to change management. We don't have to do anything at all that disrupts the day-to-day operation of the bank. We are merely changing shareholders, something that happens everyday with bank employees or customers thinking much about it.
Saturday, February 21, 2009
What to do about the Banks
Posted by Karl Smith at 4:19 AM
Subscribe to:
Post Comments (Atom)
4 comments:
I guess I'm confused. What would be the purpose of a takeover by share purchase if the point is to formally discharge the debts or otherwise engage in a bankruptcy type proceeding? The bank is insolvent, so it could be taken over any time for free.
thanks,
vachon
Well, now I am confused, Mr. Smith, is it give no more bailouts and just takeover, or is it guarantee no bank will fail and transfer bank's obligations to the taxpayers?
Thank you for sharing information. It quite useful for us also. I always love to read such type of things.
registry winner -
registry winner download -
retrievea lover -
reverse mobile -
richard mackenzie direct -
rocket italian -
rocket spanish -
roulette sniper -
rss ground -
secret affiliate weapon -
secrets book -
spam bully -
spyware cease -
spyware nuker -
spyware remover -
spy zooka -
starting a day care center -
tattoo fever -
team idemise -
the bad breath report -
the cb code -
thedietsolutionprogram -
the diet solution program -
the rich jerk -
the super mind evolution system -
turbulencetraining -
turbulence training -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
wedding speech 4u -
windo fix -
wrap candy -
zygor guides -
Post a Comment