ATS EXCLUSIVE: US to alter $700 billion bailout - may adopt UK plan

On Monday I brought you news of the UK bail out plan from a source of mine (ATS EXCLUSIVE: UK GOVT....) and I'm hearing today that the US treasury is considering purchasing preference shares in major US banks.

The reason for this radical move is this: the socialisation of the City of London has effectively given a massive safety net to the banking sector and individual banks too. No British bank will go solvent now, investors are starting to move back to the financials.

Germany, Italy and a few unnamed EU countries are considering turning the UK bail out into a wide pan-European deal. By Saturday, no European bank will face solvency. British Prime Minister is reportedly telling France, Germany, Italy and Spain to socialise the European banking system.

After these revelations, the United States is considering a nationalisation program instead of just purchasing bad assets. Wall Street worries London is becoming a much stronger, secure and less riskier market than New York.

We may hear confirmation (if true) by Saturday or Sunday night.

I'll make some calls and send some e-mails.

[edit on 9-10-2008 by infinite]

reply to post by infinite


Finance is not my strong point by any stretch of the imagination so, to help me better understand current events etc, could you please explain to me what the benefits are of adopting the UK nationalisation approach, which is costing every single UK tax payer money without even consulting them, and the proposd US approach.
What are the future implications?

I have no particular political axe to grind, I just wish to understand more aout what is going on and how it ay effect us in the future.

Cheers.

Originally posted by Freeborn
reply to post by infinite

 

Finance is not my strong point by any stretch of the imagination so, to help me better understand current events etc, could you please explain to me what the benefits are of adopting the UK nationalisation approach, which is costing every single UK tax payer money without even consulting them, and the proposd US approach.
What are the future implications?

I have no particular political axe to grind, I just wish to understand more aout what is going on and how it ay effect us in the future.

Cheers.

I believe it's safe to say that the 'benefit' is for the Banking industry and the investment class. I suspect that using the national revenue source to guarantee the Bank - while still allowing the bank to operate for profit (as if it had incurred some risk) may be frowned upon in certain - not so socialist circles.

Of course, I am no expert. Perhaps there is a regulatory aspect of this that would curtail the profiteering and unbalanced preference to enrich private stakeholder of the banks. We shall see, I suppose.

It will cost UK taxpayers about £2,000.

Nationalisation means the fear of another bank failure is now dead in Britain and the government is to force lending through the plan. The US bailout does not deal with those two factors - just purchase of debt.

US has recognised the United Kingdom have constructed a plan, when implemented, will be more successful in restoring confidence. Admitting their plan isn't well thought through.

In fact, there is a significant chance the UK taxpayer will make a profit through dividends and sell of the preference shares (when the markets become stable and normal.)

IF Paulson does not change the US plan, American taxpayers can kiss goodbye to $700 billion.

It's safe to say we're still washed upstream with the rest of the trash no matter what happens. Consolidation of power into the hands of a government that has shown its contempt for the people having their voice heard in matters of utmost importance?

Oh I'm sorry, I think I hear Hitler's legacy coming back to life anyway.

EDIT:

Sorry didn't mean to sound cynical towards the original poster... just cynical in general. Is this supposed to be good news, though?

[edit on 9-10-2008 by dunwichwitch]

The problem I see with this plan is, for all intents and purposes you are depositing your wages with the government. To my way of thinking this is not a very good idea, you might as well just give them your whole check and accept "credits"from them for your expenses.

It is being confirmed by Reuters;

Sources believe the US Treasury will start injecting capital by the end of October.

G8 could underwrite the LIBOR rate (London has already done it in the UK)

the UK plan does not remedy the 'fixing' of the debt Trash that the banks already own...nor does the Preferred Share scheme prevent the banks from issuing more, but slightly different, exotic trash in the future.
(i've heard the Italian govt bailout would also use 'non-voting' Preferred shares in the banks as a way to 'underwrite'/'insure' the banks, thus allowing investments to increase in the financial sector)


the USA plan, is most dumb... it proposes to buy 'Trash' at the premium prices (set by the bank itself) & hold on to the paper till maturity (around 7 years avg) and Paulson assumes that the mature paper will miracuously become a re-born & valuable asset.
The banks as a result are recapitalized and theoretically solvent,
and are thus able to start lending money on loans & credit....making them cash cows And once again desirable to investors who will bid up the stock price of these banks.

Wonder what are all these MBAs, finance Gurus, Elite Execs, ... are smoking ??