The money going to the banks in the form of non-voting preferred stock. Because of that, they are going to have to loan it out to preserve their earnings per share as the preferred stock will have first call on the earnings.
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I don’t think so ,,, sure preferred has first dibs not on the earnings but on the earnings distributed as dividends ,, these banks will simply cut their dividends to the bone and account for the newly issued stock by listing a greater percentage of the company as being public ,, the existing common shares will then still represent the same percentages of the bank as a whole. Sure EPS will suffer but I don’t really think these banks care at all about that... and with no voting rights whats to stop the dividend cut?
What’s to stop the dividend cut?
Shareholders.
The Globalist Socialist Bailout isnt working.
A convenient way to look at preferred stock is as “rate capped variable rate bonds”. They are most certainly not like common stock but do resemble bonds.
And they can be traded to the public like most other securities.
Bank stocks are generally not owned by hot shot day traders but by little old ladies who are looking for safe havens. Farmers own large amounts due to the variability of earnings in agriculture and both are looking for periodic payments (dividends). This may have changed since I was in banking, but probably not much.
“What’s to stop a dividend cut?”
Voting common shareholders will put the kabosh on that little scenario.
When they get the preferred, they are going to have to get busy to preserve earnings per share. Real busy.
There is a possiblity that companies will put the brakes on expansion and loan seeking behavior if Obama is elected. The plan will work really well with McCain in the hot seat.
A lot of companies are looking to expand operations, a lot of people are seeking loans to open businesses. So vote McCain/Palin.