Most of Paulson's talk in the pre-bailout decision-making period was that equity wasn't necessary. The bill permitted equity stakes anyway (one of the several changes for the better made before passage, though still falling short of a required equity stake in return for the Federal help that many, like me, recommended). Now it looks like Treasury has realized that it will need to acquire an equity stake in order to assure markets that the financial institutions are, indeed, sufficiently capitalized to be good transaction counterparties.
Read about it, as well as bank capitalization and nationalization activities in Europe:
Paul Krugman, The Conscience of a Liberal: Doing the Right Thing?, Oct. 9, 2008
Angry Bear, Equity in Return for Aid and In (Limited) Praise of Discretion.
Greg Mankiw's Blog, How to Recapitalize the Financial System
New York Times, U.S. May Take Ownership Stake in Banks, Oct. 8, 2008
Daniel Trotta, Reuters, U.S. Eyes Bank Equity as World Looks to G7
LA Times, Britain Unveils Massive Rescue Plan. Oct. 9, 2008
Christian Science Monitor, Will Britain's Rescue Plan Work?, Oct. 9, 2008
New York Times, Meltdown of Iceland's Financial System Quickens, Oct. 8, 2008
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