Government refuses exit on bailouts, Only Equities

Yes, some banks that took the TARP monies now want out of the program. They don't want to be labeled with a Scarlett Letter of Failure. Our government doesn't want to let them out of the program. Instead, they have broached the idea of converting the debt into equities. Right now, our government has preferred shares representing loans from our government. They want to change preferred shares into common equities at the 19 banks receiving TARP funds for banks that need additional capital. This move would place troubled banks more directly into the seat of taxpayers, and potentially bring about a type of nationalization like we’ve already seen with AIG and Citigroup. Conversion of preferred shares into common would boost the government’s stake in a bank, possibly leading to greater government control over the institution. The move would wipe out existing shareholders, of course, but also would recapitalize banks without actually costing us/the government any more of our taxpayer money. But who will call the shots at the shareholders meeting? Think about it.