$250 Billion Being Doled Out To Banks This Week

With the Treasury writing checks for the first $125B today, we should start the countdown to a restoration or un-freezing of the credit markets now. The problem is with some banks reporting that they will be hoarding the cash and not offering loans, it is more likely to be a move-from the-freezer-to-refrigerator-thaw instead of a take-out-of-the-box-and-place-in-the-microwave-thaw.

 

Hank should include an ‘Acceleration Clause’ for some of the smaller and higher rick banks that are set to receive the capital. I assume that there is some mechanism to monitor both the lending activity and the overall health of the companies that receive the money from the Treasury. With this monthly check-up, the Treasury should have the authority to seize assets to serve as collateral for the preferred share transaction when the operating status of the company declines to a certain level. This will ensure that we get full repayment for “our” investment. As it stands, the Treasury has ‘Senior Preferred’ status only guarantees that the Govt will be first in line when the company collapses. $250 billion is too much to gamble with when standing in front of bankruptcy judge.

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