Report says U.S. May Convert TARP Bail Out Money to Common Shares

Now that the Treasury and the Federal Reserve have burned through all of the TARP money without a prayer's chance of Congress approving more, a new tactic is being reported:

In a significant shift, White House and Treasury Department officials now say they can stretch what is left of the $700 billion financial bailout fund further than they had expected a few months ago, simply by converting the government’s existing loans to the nation’s 19 biggest banks into common stock.

Converting those loans to common shares would turn the federal aid into available capital for a bank — and give the government a large ownership stake in return.

While the option appears to be a quick and easy way to avoid a confrontation with Congressional leaders wary of putting more money into the banks, some critics would consider it a back door to nationalization, since the government could become the largest shareholder in several banks.

Uh, that's not nationalization in spite of various commentators trying to say that. It is more corporate welfare. In nationalization the shareholders and bond holders are wiped out and the bank executive management is fired, held accountable.

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This all meaningless if Treasury is not

willing to exercise control over TARP recipient. At least with preferred stock/dividend we were in a better position to receive some return on our money.