The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: Moominoid who wrote (148795)	9/22/2008 1:42:54 AM
From: Sr K	Read Replies (1) of 306849

No. Bernanke told all the banks in March, "Raise more capital, much more, more than you think you need." Now they all know it. If the "Plan" passes, and Friday's gains hold (futures are down), banks can sell half the shares they would have at their lows. They might go back and back for 3 raises. This is the 'trust me' part. Pass the bill. The banks raise $400B or $600B of capital. And if they have to, they raise another $600B later. Guess who is left to make 6% of the money raised? GS, MS, and MER/BAC and a few non-US firms. Ask for Convertible Senior Preferred, like Krugman wants, and the stocks get slaughtered, like AIG last week. To be consistent any Senior Preferred will have to be 3-month LIBOR +8. Krugman didn't think ahead to how the "good" banks will raise capital. Paulson's Plan is a success plan. Both of their ideas could be addressed by a non-zero exercise price, which for banks could have windows where the exercise price goes down if they take too long to raise capital. Congress should take time to get more input, depending on how the financial markets operate this week.

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