Problem with demanding "equity stake" in Wall St in exchange for bailout

[yurbud]

One of the conditions Democrats and independents like Bernie Sanders are setting on the $700 billion bailout is that we get some kind of equity stake in the companies bailed out.

I do see a fairly obvious problem with that--isn't it possible that the insiders have already hollowed out their companies, shifted everything that isn't nailed down to secret accounts in the Cayman Islands, and so like stockholders, we would be left with worthless paper?


I do not propose that we give them the money without conditions--just the opposite: conditions without money.

Force them to make those mortgages good by working out reasonable terms with those in default or foreclosure.

Frankly, how many blank checks do we have to give the Bush administration before we realize they will pocket it, then take our checkbook and pen too?

[Imperialism Inc.]

1. Sure, that is possible but it doesn't cost us any more if the equity

share is linked to how much we bail them out for. If the bailout allows them to recover we recoup money from future profit. If it doesn't and they go under the equity doesn't do us much good. There are several proposals along those lines. I am specifically talking about ones where we get an equity share based on how much bad debt we take off their hands not anything where we are buying equity on top of the debt we buy.

[yurbud]

2. what if it's all a house of cards like Enron?

It wouldn't have mattered how big a share they gave us. 75% of nothing is still nothing.

And the money we gave them would evaporate to the same offshore accounts.

[Imperialism Inc.]

3. It is still better than the alternative of giving the bailout money

and not getting an equity share. Unless maybe you are arguing we shouldn't do the bailout at all. I think we probably have to and, if we do, we are better off with a share than with none.

[yurbud]

4. I would prefer that we not or at least come up with a way to make the perps pay for it