Roman Mitz (rmitz) wrote,
Roman Mitz
rmitz

Bailout Articles Roundup

I'm skipping some of the early commentary here, and concentrating on why the bailout is a good idea, probably necessary, and will end up not costing the government anything--in fact it should make money over the long term.

As reference, the text of the orginal draft of the bailout plan:
http://www.nytimes.com/2008/09/21/business/21draftcnd.html

This draft is obviously inadequate in detail. Lots of people have made the points for needing oversight, etc, so I won't rehash those. We also seem to be nearing an acceptable compromise which includes these needed revisions (from popejeremy http://thehill.com/leading-the-news/paulson-senate-dems-reach-tentative-bailout-deal-2008-09-24.html )

Bush's speech transcript:
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/24/AR2008092403399.html

http://investors.overstock.com/phoenix.zhtml?c=131091&p=irol-newsArticle&ID=1201907
(Overstock CEO Comments on President Bush's Speech Outlining Bailout Plan)

Not what you might expect. These are important revisions in how we handle short sales which need to happen, as well as support that the government shouldn't pay prices which are too high for these SIVs (Structured Investment Vehicles).

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/23/AR2008092302322.html
(Bill Gross - How Main Street Will Profit)

This (and the follow up interview below) are hands down the best information I've seen anyone write on why this could work out quite well, why it's necessary, and why it's not really a windfall for Wall Street - they will be paying for their mistakes, because they cannot play out their hand.

http://cosmos.bcst.yahoo.com/up/player/popup/?rn=289004&cl=9885262&src=finance&ch=4043681
(Follow up TV Interview on CNBC)

Another good article along these lines from Andy Kessler in the Wall Street Journal (got out of the .COM bubble when it started looking completely insane.)
http://www.collegejournal.com/article/SB122230704116773989.html

Warren Buffett Articles

http://www.cnbc.com/id/26867866/

Transcript on CNBC inteview about Goldman Sachs investment. Lots of commentary on the fed Bailout--indicates some of the same ideas as Gross has but less elaborate).

http://www.minyanville.com/articles/GS-buffett-BRK-X-congress-goldman/index/a/19154/p/1

The above article makes the claim that Buffett's deal with Goldman Sachs is not an investment, it's an endorcement deal.

While there is certainly an element of that (which is why it makes financial sense for Goldman), these kinds of preferred share investments are quite common. How is Buffett handing over 5B in cash NOT an investment? Sure, he gets a nice premium, and there is no equity risk--but in terms of risk, while he would get his principal back before shareholders in the event of a bankruptcy, he would be subordinate to all normal debt holders.

The Warrants are important and have value, but not actually part of the current investment, they are the outline of how future monies could be invested. Warren could by up to 5B worth of shares (at a $115 value). Warren has used this sort of structure before. So, claiming it not an investment is just hyperbole.
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