Instead, it would allow firms to replace those shares with common stock rather than government-held shares. The exchanges also would give the government significant ownership stakes in the banks that participate. The taxpayer would be left unsupported, only to profit if the company’s stocks increase.
Obama also wants Congress to give the government the ability to take control of large, interconnected financial firms to wind them down. The FDIC would also be able to step in and buy a stake in the firm, assume obligations, take a lien on the firm’s assets, or sell off the firm’s assets, if a troubled bank were to accept loans from them.
Although recent earnings reports indicated a slight rally for the financial sector, the credit markets are a whole other story and the industry will need some time before a solid turnaround can begin.
In a side note, New York Attorney General Andrew Cuomo said government officials pressured Bank of America’s CEO Ken Lewis to complete the bank’s purchase of Merrill Lynch and threatened his job security, reports Ieva M. Augstums for the Associated Press.
- Financial Select Sector SPDR (XLF): down 18.4% year-to-date