## Offers You Can't Refuse: Henry Paulson Edition

From Tyler Cowen:

Citigroup and JPMorgan Chase were told they would each get $25 billion; Bank of America and Wells Fargo,$20 billion; Goldman Sachs and Morgan Stanley, $10 billion each, with Bank of New York and State Street each receiving$2 to 3 billion. Wells Fargo will get an additional $5 billion, reflecting its acquisition of Wachovia, and Bank of America receives the same for amount for its purchase of Merrill Lynch.... The government will purchase perpetual preferred shares in all the largest U.S. banking companies. The shares will not be dilutive to current shareholders, a concern to banking...executives, because perpetual preferred stock holders are paid a dividend, not a portion of earnings. The capital injections are not voluntary, with Mr. Paulson making it clear this was a one-time offer that everyone at the meeting should accept. Here is the story. No matter what your point of view, you ought to be stunned by this development. I am not stunned. I wqnt to sing! Nunc dimittis servum tuum, Domine, secundum verbum tuum in pace: Quia viderunt oculi mei salutare tuum Quod parasti ante faciem omnium populorum: Lumen ad revelationem gentium, et gloriam plebis tuae Israel. If this doesn't revive the interbank market, nothing will. If this doesn't, I'm going to start training in flint-knapping to get ready to fight for cans of salmon in the aisles of Trader Joe's... I am nervous about this "preferred stock" business... As, say, Citi's net worth declines there comes a$25 billion tranche in which stockholders are effectively wiped out but the thing is still moving. Henry Paulson is performing a dread magic: creating zombie banks in the hope that they will do his will. Voting common stock seems to me to be a better idea. Otherwise, we may have need of the Ogoun Instructional Package:

Ogoun Feray, Ogoun Badagris, Ogoun Zye Wouj! St Jacques Majeur!!