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BGonline.org Forums
What's your opinion on the $700bn bill?
Posted By: lenny In Response To: What's your opinion on the $700bn bill? (Havard Raddum)
Date: Friday, 3 October 2008, at 3:06 a.m.
Asked in more than one place:
Why Can't The US Government Get Buffett's Terms?
Hours could be spent outlining the rock-headed defects in the "Paulson Plan", but many of them condense into a comparison between blank checks and sound investment.
The US Government has a lot more liquidity than Warren Buffett, but look at what Buffet got from Goldman, for his $5 billion:
http://apnews.myway.com/article/20080924/D93D71R80.html
"In addition to buying $5 billion in preferred stock, Berkshire also got warrants to buy another $5 billion in Goldman's common stock."
"Berkshire's preferred stock in Goldman will pay 10 percent and can be bought back any time at a 10 percent premium. The warrants allow Berkshire to buy $5 billion in common stock at $115 per share any time over the next five years."
So Buffett's vehicle gets preferred equity(putting him in front of all common holders if assets get liquidated). He gets an annual 10 percent coupon, indefinitely, at a time of low interest rates. He gets warrants, creating an option to cash in further if the deal is profitable.
The US taxpayer is still slated for hind titty. No equity, let alone peferred. No coupon. No options/warrants. Leaks from the failed negotiations have stated that these provisions "wouldn't work".
The answer to the question: the taxpayer can't get these terms because Paulson is the fox in the henhouse. He came from Goldman Sachs, and he's going back to the street when the administration changes in January. His patrons have told him to buy liabilities, but not equity or protection.
Pathetic scam, replicating the Bush administration in situ.
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