CitiGroup wants the gov't to convert its preferred stock to common stock
ProPublica's saying that the Treasury Department has announced they will allow banks to convert the existing government shares into common stock.
What the hell is up with common stock? and why the sudden movement away from preferred stock?
Thankfully, The Baseline Scenario is here to answer that question.
Spoiler: the government is being stupid.
4 comments:
Common stocks typically give voting rights to a share holder. Usually it is one vote per share for a member of the board. Preferred stocks guarantee a certain amount of payments are given out first to preferred stock holders, termed dividends. Preferred stocks do not usually give voting rights to investors, but they can be modified into a different form of preferred stock or converted into a common stock overtime to give voting rights its holders. Common stock may enable bankers to reduce the paying out of dividends and even if they do pay them out to investors, they can postpone when they pay them out, saving them money. Holders of common stock are not always guaranteed the paying out of any dividend. Also voting rights given to a major common stock holder may benefit some executives on the board. Common stock generally may enable the companies to earn and retain more capital over time.
I think that although nationalizing the banks is risky business and "Too big to fail," may have its limits we do need to keep these banks around. Any thoughts? I do realize we are really in a form of depression with this kind of debt and these toxic assets & credit collapse.
While I certainly don't think that nationalizing a bank is a wonderful solution, I would think the current course of writing checks without control or oversight cannot continue.
Absent government funding, AIG, BoA and Citi would likely not be here anymore - so it's bizarre to think that government would not insist on some tangible oversight to keep the new money from following the old money into oblivion.
I certainly cannot claim market expertise, but an awful lot of people who can are saying these banks are already doomed - why prolong the agony?
Put 'em down, get it over with, and move onto the next big problem.
Well,I think that Citigroup, Bank of America and AIG can return to solvency. I have heard and read experts from all sides and perspectives. I myself keep tabs through the Economist, NY Times, CNBC, ABC, CBS, and CNN,and the experts are divided on this issue. I do have degrees relating to economics and government and I have a large library on these and related matters, but none of us has a crystal ball. Who can say for sure? I do say that we need these banks though. Restructure them.
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