I’ve said it before, and I’ll say it again, but bailouts must involve significant pain in order to be effective. The bailout of Bank of America was far too gentle. Many firms would want capital on those terms. Bailouts should be an unwanted last resort that preserves stakeholders with priority claims, but destroys equityholders, and other junior claimants.
I’ve submitted many of my policy ideas to the Obama administration, but they haven’t gotten a warm reception. If any of you would like to vote my ideas up, go ahead and do so here. Thanks; maybe the Obama administration will prove more open-minded than the Bush, Jr., Administration.
Thoroughly interesting & impressive that you would post on change.gov – I hope your ideas will effect & influence internal debate & Obama administration policy. As always & especially on big news days, your blog is must reading. Btw, I would be very curious to get your take on Paul Krugman’s op-ed in today’s NYT tinyurl.com/6wmjg9 – Thanks a lot!
Terms sheet refers to $4B in preferred stock…it wasn’t clear whether this stock has to be *purchased* or whether it is given automatically in compensation for the guarantee. Also, what is the seniority of this stock relative to other outstanding preferreds?