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Wednesday 8 October 2008

Have Gordon Brown and Alistair Darling screwed up yet again?

Burning Our Money has spotted something of great importance:
"We've just read the government's bank rescue plan. Worryingly, there's no mention whatsoever of those equity warrants we blogged yesterday.

As you will recall, the model we taxpayers want is the Warren Buffett Way. Wily old Warren put his $5bn into Goldman Sachs preference shares - just as our government is now proposing - but also insisted on a big helping of keenly priced equity warrants (the option to buy Goldman shares in future at a price fixed now, at today's firesale levels). So Warren will share fully in any future increase in Goldman's share price. Quite right too.

Darling has just been interviewed by Humphrys, and talked only of taxpayers benefiting from the dividends on the preference shares, not sharing in any future price appreciation. Sadly, Humphrys didn't know enough to ask the warrants question. But somebody needs to.

We should not be pumping equity capital into the banks unless we get a share in the future growth in the banks' value. That's obvious.

Isn't it?"
Don't expect John Humphrys to ask a decent technical question, he is way out of his depth in this area of discussion. It is also in John Humphrys interests for this plan to work it is after all a product (at least in part) of the Labour government.

2 comments:

Tom Coady said...

There's something incredibly rotten about this bonanza for banks. How did we reach a point where these usurers became indispensable to our way of life? Why can't anyone set up in competition? What do they actually do besides moving money around? It seems to me like they have a licence to print their own currency - for every pound deposited they can legally loan at least 10 times that amount or much more. Also why should icesave investors be shielded from their own greed? I thought it was a fundamental principle that the return rate is propotional to the risk.

Barnacle Bill said...

Warren Buffett knows what he is doing, the other two NuLabor twats only pretend they know what they are doing.
I bet the boys at the banks were laughing behind their hands when they saw these two numpties enter the foyer with bags of our money.
The most annoying thing about this whole affair is that whilst we are sat shivering around a candle, huddled up in our blankets; those two NuLabor traitors along with the rest of that scum will be enjoying their golden pensions.