Congratulations, everyone. We own all the banks....or, wait...do I have that backwards?
What will happen is the government will get warrants to purchase common shares at a later date and will end up making money on the deal.
“What will happen is the government will get warrants to purchase common shares at a later date and will end up making money on the deal.”
If you can foresee that future, that’s just great. That’s like saying the government will make money from socializing the medical system. Yeah, they probably will. And your end of the deal? In the meantime, the combined books of FNM & FRE are likely to experience minimally 1 trillion to as much as 3 trillion in dollar losses as every bank gleefully unloads every fetid piece of trash loan they ever made and were dumb enough to get stuck with onto this new “entity”. So what the earnings of those companies will be over the course of time it takes to “normalize” their earnings is unknowable. Any monetary value ascribed to FRE/FNM common is an utter joke. Just how the common dividends of these companies should be categorized under government control is an interesting and quite ironic financial construct.
This is being done so that the banks can offload their sewage into an Enron-like off-balance-sheet entity, and so the Chinese and Russians will not perform some sort of radical moves with regard to the something like 2 trillion in GSE preferred debt owned by them. I like working for these guys, don’t you?
Meanwhile, the Congress, according to the Constitution, is the sole disburser of Treasury money collected as tax revenues, so I guess that’s yet another obsolete concept we can just throw out as we move into out new and improved and freshly-created future. Because, well, we have money center banks to tell us how our money should be spent. On them. To strengthen their balance sheets. On our dime. Booyah!
Yeah, the government will make money. Right. They make money on everything else they do, don’t they? They got Morgan Stanley to advise them on the details of this bailout, and I’m sure as the sun rises that MS has no other interest than making the US government money. Got it. Love it when a plan comes together.