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> None of the organizations that benefit are going to voluntarily relinquish access to these crutches Except of course that that's exactly what most of them di

> None of the organizations that benefit are going to voluntarily relinquish access to these crutches Except of course that that's exactly what most of them did. By taking preferred stock the treasury gave the banks an incentive to buy back the shares and make the treasury a bit of money on the side. Much better than the UK government buying common stock and being stuck with it till they sell at a loss (as they're doing now). My understanding of the GSEs is that they're still haggling over precisely what form they ought to take in the brave new world i.e. it's not particularly that they want to be state run.

roymurdock 11y ago
For the banks, the real crutch is the mental/precedence crutch of - buy back your equity and go back to running things as normal, and if the system fails we'll bail you out through nationalization yet again, so for now you can continue to operate under the taxpayer-shared-risk assumption. Using preferred stock was intelligent design in a micro level, but at a macro level the incentives and risk/reward profile constructed by the bailouts and liquidity injections is completely perverse.