U.S. May Convert Banks’ Bailouts to Equity Share

[peaceandlove]

U.S. May Convert Banks’ Bailouts to Equity Share

White House: Approach will prevent need to seek more cash from Congress

By Edmund L. Andrews

updated 2:17 a.m. ET, Mon., April 20, 2009

WASHINGTON - President Obama’s top economic advisers have determined that they can shore up the nation’s banking system without having to ask Congress for more money any time soon, according to administration officials.

In a significant shift, White House and Treasury Department officials now say they can stretch what is left of the $700 billion financial bailout fund further than they had expected a few months ago, simply by converting the government’s existing loans to the nation’s 19 biggest banks into common stock.

Converting those loans to common shares would turn the federal aid into available capital for a bank — and give the government a large ownership stake in return.

Continues: http://www.campaignforliberty.com/wire.php?view=4286



Mike at FeverIAm Commentary:

"Wait for it folks, it's coming."

Specific to this article starts at 8:23.

Video (13:56): http://www.youtube.com/watch?v=FnYukIy6CWA&feature=channel_page

[peaceandlove]

Mike from Fever I Am posted this interesting tidbit today on his blog:

FRIDAY, 1 MAY 2009

US Federal Reserve to delay 'Stress Test' results

In amongst all the 'news' on the Chrysler bankruptcy, a couple of articles most news agencies are ignoring...

It would appear there are internal battles on how to "frame" the results of the Federal Reserve 'Bank Stress Tests'. It would appear they are at odds with 'regular investors' on what to use as 'Capital'. Check the article from Bloomberg on this info here: http://www.bloomberg.com/apps/news?pid=20601068&sid=aVlgKH_MT_mo

Reuters is also pointing out that the results will be individual banks, instead of the expected 'Summary' report. Their article is here: http://uk.reuters.com/article/businessNews/idUKTRE53T7TL20090501

The most important bit of the Bloomberg article:
While the banks were ordered not to release the results of the stress assessments prematurely, Goldman Sachs yesterday may have provided a hint with its decision to sell bonds and shares, issuing $2 billion in five-year notes without a government guarantee and making a $750 million stock offering. A spokesman for Goldman Sachs declined to comment.

“You can read between the lines on it that nothing adverse will be coming out next week” about Goldman Sachs, said Ralph Cole, a money manager at Portland, Oregon-based Ferguson Wellman Capital Management Inc., which oversees $2.2 billion.

At least six of the 19 largest U.S. banks require additional capital, according to preliminary results of government stress tests, people briefed on the matter said this week. While some of the lenders may need extra cash injections from the government, most of the capital is likely to come from converting preferred shares to common equity, the people said.


May 11 is looking more and more like the tipping point for a market 'correction'. I suspect the 'insolvent' banks will hang on for some time; with perhaps a summer 'Bank Holiday' on the cards.

Peace
POSTED BY MIKE AT 08:01

Source: http://feveriam.blogspot.com/