Banks negotiating to reclaim stock warrants they granted in return for Troubled Asset Relief Program money may shortchange taxpayers by almost $10 billion if Treasury Secretary Timothy Geithner’s first sale sets the pace, data compiled by Bloomberg show. Full Story »
Posted by Kaizar Campwala
Pittman did very good job at putting together data that otherwise could be used for anesthesia quite easily. The contextual relevance of the story forces the reader to see the facts for what they are - and some of them are stunning. In short - some of the banks are complaining that taxpayers may get a windfall - and without the ability to manipulate the market (as is often the case but not actually called that) the banks must deal in a transparent manner with re-purchasing the options. They aren't comfortable at buying them back at what they are referring to as inflated prices. Fact is - the stabilization is a direct result of the taxpayer fund ballast. Again, I respect the writer for the comprehensive neutral view of the facts and a very skilled approach to making this digestible. In short - the banks are suffering from amnesia and stockholder thunderclouds - because the government did not impose a repo agreement up front. This was the critical omission by Paulsen and the Bush administration as they skillfully but fecklessly dealt with this like a hot potato so they could get out of town via jet - instead of on the rails.
One thing I haven't seen much talk about is a public advocate. When NYC was in terrible vendor hell - Mark Green (currently Air America Pres.) was the NYC Public Advocate - He helped mitigate numerous situations of all feather, and was in fact the electorates Ombudsman. It is an exceptional program that forced fairness into play and served to force dialog. It seems to me that if the taxpayers, had an independent representative that is rewarded by some magic formula to negotiate on behalf of his investors (taxpayers) this dialog currently taking place would force the banks into position of compromise - immediately. Let the public advocate duke it out with the banks and be subject to the same consequences as any other group holding debentures. Combat between capitalists would also shut down the psycho-talk from the neo-conservative right wing - which is so far right they risk circumnavigating themselves.