Thursday, September 18, 2008

Schumer: Inject Money for Equity

Something that seems to have been lost on the market late this afternoon: The comprehensive solution that Chuck Schumer is presenting is going to dilute shareholders of banks. From Bloomberg:
``The Federal Reserve and the Treasury are realizing that we need a more comprehensive solution,'' said Schumer, who today proposed an agency to pump capital into troubled banks. ``I've been talking to them about it,'' Schumer, a Democrat who chairs the congressional Joint Economic Committee, told reporters in Washington today.

Schumer urged forming an agency to inject funds into financial companies in exchange for equity stakes and pledges to rewrite mortgages and make them more affordable.

Schumer advocated a Great Depression-era Reconstruction Finance Corp. model, different from the Resolution Trust Corp.- type plan others have floated.
The last time the gov't took equity stakes? Fannie, Freddie and AIG. This is NOT good for shareholders, they will be similarly wiped out.


Anonymous said...

McCain supports this too.
Shareholders were duped. But should have known better after Enron, repeal of Glass-Stegall, and the immunity for the lawyers and accountants.

JP said...

McCain supports this too.

McCain supports wiping out the shareholders? or burdening the taxpayers? (or maybe both? the money has to come from somewhere.)