I was thinking that the only real downside is another possible dilution but if the stock goes to $0 then it cant be diluted much further right? or wrong Therefore the Feds might want to support the pps if its only because they want the option to dilute again? Any Ideas
I doubt the stock will go to 0 because the gov wants to keep the 4.5 trillion in liabilities off its books. That's why they have warrants to purchase 79.9% (0.1% GAAP account rules) along with non-voting preferred shares. I see common trading sub 10 cents. However Paulson did not think this one out as Freddie and Fannie's whole business model is based off purchasing mortgages between 5 and 7% with money from the Treasury Dept. in the form of preferred @ 10% Eventually there going to deplete their capital and the treasury will buy more creating a vicious cycle until it reaches the 100 billion limit. Then we're going to be in the exact same situation we were in last Friday except it would have cost taxpayers trillions of dollars. Who knew all the subprime slime in the country would end up on the Treasury's Department books.
Paulson says "But there are a number of reasonable cases where even the existing shareholders will end up having their stock price come back". http://www.businessweek.com/magazine/content/08_38/b4100000226271.htm
i think that cake was baked when someone from Goldman (paulson) was sworn in to the top post in 2006 wikipedia says his net worth is 700 million, and the first thing he does is distribute garbage to the taxpayer at full face value gee, wonder what will happen to government interest rates when people figure out the books are full of subprime junk?
Just like the S&L crisis. you thought they would of learned by now "Neil Bush paid a $50,000 fine and was banned from banking activities for his role in taking down Silverado, which cost taxpayers $1.3 billion."