Well chips, since the entire world is doing the same thing, it’s not like the US will at a disadvantage by being broke, since everyone else is likely to be broke too. :wink-wink
On Bailout
The theory here, is that if they buy into strong banks to increase their capital base, that these strong banks will take over the weak ones. This should reduce the number of banks that the FDIC would need to bail out. National City is a perfect example, they were getting killed, they sold 60% of the company last month for a few Billion in cash and the stock still dropped and they continued to be in danger of failure.
This idea of buying into healthy banks is a much better deal than buying up all the crappy paper that the banks have. This “equity” buy is not a bailout, since it’s going to the best/most stable banks. It’s really more of a loan. Sure it could be that Chase, WF, PNC, etc. might not all survive, but it’s more likely the government will make out better this way, than paying 40/50/60 cents on the dollar for bad paper. It may take 3-5-10 years before the shares are bought back, but the result should be much better than the original “buy distressed assets” plan.
BTW the first $125 billion went to buy stock in the top banks, with another $125 billion for mid size and smaller banks:
Top banks participating
The nine financial institutions that will split that first pool of money include the nation’s four largest commercial banks – Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500).Also included are the two remaining independent investment banks – Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500) – as well as Merrill Lynch (MER, Fortune 500), which last month agreed to sell itself to Bank of America. Two other major banks that primarily serve Wall Street rather than retail customers, Bank of New York Mellon (BK, Fortune 500) and State Street Corp. (STT, Fortune 500) round out the nine institutions getting help in this first round of investments.
from here: http://money.cnn.com/2008/10/14/news/economy/bank_bailout/index.htm?postversion=2008101408