Wednesday, April 29, 2009

Geithner Sings "You Say You Want a Stock Dilution"

Stockholders who invested as result of stellar bank first-quarter earnings may spit at Treasury Chief Tim Geithner. Recall he postponed stress tests so as not to interfere with the one quarter "mark to fantasy" mumbo jumbo and billions funnelled into the banking sector via AIG. Bloomberg reported on looming dilution for many bank shareholders. It will come one of three ways:

Geithner has said that banks can add capital by a variety of ways, including converting government-held preferred shares dating from capital injections made last year, raising private funds or getting more taxpayer cash. With regulators putting an emphasis on common equity in their stress tests, converting privately held preferred shares is another option.

More taxpayer cash means greater government control and restrictions. America's Sovereign Debt Fund continues to stuff taxpayer wallets with kajillions in IOU's. If I purchased bank shares in the last month, I'd think Tim Geithner owed me.