Thursday, October 2, 2008

The Zuckerman Alternative - to the Bailout

Mort Zuckerman, magazine editor, publisher, and real estate billionaire, suggested on CNBC today that essentially giving away $700 billion by buying securities nobody else wants, is not the only answer.

If the goal is to sustain the system and inject cash flow, why not simply buy preferred shares in the companies that need it? Of course it would dilute the value of the company's stock. Preserving shareholder value isn't supposed to be the concern of the federal government. That's the company's job and they blew it. The taxpayers' interest is only in the infrastructure.

This is similar to what was done with Freddie, Fannie and AIG and similar to the deal Warren Buffet made with Goldman Sachs.

The companies could have the option to buy back the shares at a 10% premium, otherwise, the feds start selling them on the open market in five years (that bit was my idea).

Instead, the senate loaded up the bailout bill with an additional $150 Billion in special interest favors (who's going to notice a few extra hundred bil?). I hope the House kills this monstrosity so that better options, like Zuckerman's can be considered.

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