Wednesday, February 11, 2009


The president's proposal to save banks is to give them money. OK.
Let me tell you why this won't work.

As an individual investor.......................I'M NOT PUTTING ANY CAPITAL IN BANK STOCKS! HERE'S WHY.

Banks that take TARP money will have to first pay dividends to the Treasury for its preferred shares before anything is paid to shareholders (ME). So, I'm getting no dividends and I'm only betting on a higher stock price. Not only that but, in the event of bankruptcy the Treasury is first in line.

Once a bank gets in bed with the government, the property rights of the bank stockholders become totally insecure. When the government gets in bed with a bank, or any business, they take over control..... and smart stockholders bail out. They would be fools not to!

Bank stocks are in the dumps because there is no investor (ME) confidence. Bank stock prices in the dump deflate the banks' capital, regardless of Treasury investments. Less capital makes them less likely to lend and therefore extremely likely to fail.

When you listen to the policies being enacted and implemented by this administration, one has to wonder if they really want to save banks or do they simply intend to 'break' them in order to take them......

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