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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: neolib who wrote (151184)	9/27/2008 12:32:43 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 306849

The John Paulson (not sec of treasury) plan does the same thing with a different mechanism. It simply buys senior preferred stock from the entities in question for cash, allowing them to recapitalize. It leaves the toxic stuff on the banks books, but buys them time to work through it (presumably if it still has value, that value will be realized). The banks take an immediate hit from dilution, but buy time. If the banks recover, the taxpayors have a stake. If they don't, then they get absorbed by the private market (a la WaMu-JPM this week). No extra moral hazard is created. The taxpayor is looked after. The banks get their dough.