The Government of USA provided bank guarantees and actual bail out cash to the financial services system when they were teetering on the verge of collapse.
Now happily for every one the warrants are in the money. This means if the government sells the warrants it can make some decent money – nowhere near enough say what they paid to bail out AIG (almost US $ 200 billion), but some lose change. Now there is a debate in US : “Should the Government profit (the word sucks!) from warrants it got when it provided capital to the banks?
Senator Mark Warner (quoted in Bloomberg) – a Democrat and member of the banking committee says “the taxpayer took the risk …so to leave the upside on the table makes no sense”.
However Jamie Dimon (of J P Morgan Chase) says “No. At least not from banks like ours which was not likely to fail……the Treasury’s JP Morgan Chase warrants may be worth $ 1.8 billion…and we are hoping that out of fairness they cancel 50 percent of them”.
Amazing how short the human memory is. Mr. Jamie Dimon are you not happy please see how much money you saved because the government bailed out AIG or Bear Sterns – and you will stop cribbing about this 1.8 bn $. When it comes to executive compensation how many times did you hear the word fairness? Amazing that you should use such words when it is convenient. It is a case of devil quoting the scriptures!
The whole game is like a mutual fund manager (after all the government did not ask us whether to bail out) – so we put in the money at Rs. 10 and created a mutual fund corpus. Then the corpus was invested in assets most of us believed was shit. Now the Nav has gone up to Rs. 12-13 in 3 months so the people who sold us the junk want US TO GIVE back the units @ Rs. 10 – saying you paid only Rs. 10!! LONG LIVE CAPITALISM…have fun.
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