GSEs buyback warrants= fairness. But the GSEs have NO representation in this politically oriented endeavor to resolve everything left over from '08.
As discussions happen and negotiations and ideas are flying around, There is no party representing the interest of common shareholders except for a few plaintiffs, and there's little chance they'll get a court decision before crooked politicians screw them over.
Without representation in the negotiations, commons are toast. See what happens when a preferred holder (Paulson) pays Moelis to come up with a resolution that all parties are almost assured to find reasonable....all parties except for the party that has zero representation (common shareholders) and didn't pay Moelis to come up with an equally elegant solution.
Can't someone here fork up the dough to pay, say, one of the big four accounting that hasn't been involved at all to come up with an equally professional looking and elegant solution that is fair to common shareholders? GSEs being able to buyback the warrants is a solution that is fair and has precedents. Treasury applying all NWS $ towards recap until the right level of capitalization is reached is fair. Both of those things would basically reset everything, and put the "temporary" conservatorship to an end. The very fact that, in the face of the GSEs' having wonderfully improved their own businesses operations and portfolios, the political zeitgeist is still focused on screwing common shareholders or eliminating the GSEs entirely proves that the conservatorship was never meant to be temporary and to extinguish itself without also accomplishing something huge for the TBTF in the process. The conservatorship was always meant to be a means towards reaching an end result that the TBTF approved of. And here there is this totally accepted notion that the Federal gvt can invest in companies and make enormous gains "for the taxpayers" by doing so? Doesn't anyone realize that the very idea of that is the opposite of what a free nation with free markets is all about? If a gvt can invest in companies, the danger is that the gvt will make laws and regulations that benefit only the companies it is investing in, and hurt other companies, thus making the gvt into a fascist-like system. Look into Mussolini's system, by which gvt had to have representatives on the boards of all companies, for example. So the danger is that a gvt can enact laws that favor its investments. And here with the conservatorship we've seen just that very thing happen. The gvt has used its control of the GSEs not to benefit its "investments", per se, but rather to enable the TBTF to attempt to figure out how to extinguish them. Never give the gvt control of anything. People are missing the forest for the trees when they look at Moelis's proposal and say to themselves, "oh..hey the taxpayers make an enormous profit! Alright! Hurray!" That it a truly disgusting notion, and it's not how a free market works.
AI
