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Well, the government is buying the company out (and, one hopes, firing the CEO and board) and diluting the existing shareholders' stake, so it's more like "big
by sethg 18y ago
Well, the government is buying the company out (and, one hopes, firing the CEO and board) and diluting the existing shareholders' stake, so it's more like "big company sucks up insolvent small company for pennies on the dollar" than "government helps cronies by pouring money into badly-run business".
- nickb 18y agoPennies on a dollar? Do you mean negative dollars because for this "loan", the government has "bought" a two trillion dollar debt, at the very minimum.
- sethg 18y agoIIUC, one reason we're in this mess is that nobody has any idea what the securities at the bottom of this house of cards are really worth; the risk models that were constructed during the inflation of the bubble have been discredited but nobody knows what to replace them with. So private banks weren't willing to hang $85B of their own capital out on the hope that they didn't get any more surprises. The Fed doesn't know what those securities are worth, either, but they can calculate what preventing a collapse of the financial system is worth, and compared to that, $85B is chump change.
- reynolds 18y agoIs the Federal Reserve part of the government?