Remember how in the rush to war not everyone read the intelligence report line by line, some folks relied on just the summary?
Well Big Apple read thru the latest available draft of the bailout bill and noticed that the upside for mainstreet is a lot different than in Dodd's draft from a few days back.
In Dodd's draft, we the people would be able to exercise warrants for stock equal in value to any $$$ lost when the securities are eventually sold. Though Dodd's draft never clarified principle vs. interest, the concept was very precise and included a formula giving us warrants in value that would cover our loss with potential upside.
Maybe how warrant's worked in Dodd's draft was really what had the House Republican's riled up, because, guess what...the new "compromise" draft leaves warrants all up to: Paulson. A bit more below.
Here is the text from the draft referenced above starting at page 45.
To summarize, the quantity and price of any stock warrants that we receive
when trash assets are purchased is now up to Paulson
15 (d) CONDITIONS ON PURCHASE AUTHORITY FOR
16 WARRANTS AND DEBT INSTRUMENTS.—
17 (1) IN GENERAL.—The Secretary may not pur18
chase, or make any commitment to purchase, any
19 troubled asset under the authority of this Act, unless
20 the Secretary receives from the financial institution
21 from which such assets are to be purchased—
22 (A) in the case of a financial institution
23 that is registered (or approved for registration)
24 and traded on a national securities exchange or
25 a national securities association registered pur
1 suant to section 15A of the Securities Exchange
2 Act of 1934 (15 U.S.C. 78o-3), a warrant giv3
ing the right to the Secretary to receive non4
voting common stock or preferred stock in such
5 financial institution, as the Secretary deter6
mines appropriate; or
...
15 (A) PURPOSES.—Such terms and condi16
tions shall, at a minimum, be designed—
17 (i) to provide for reasonable participa18
tion by the Secretary, for the benefit of
19 taxpayers, in equity appreciation in the
20 case of a warrant, or a reasonable interest
21 rate premium, in the case of a debt instru22
ment; and
23 (ii) to provide additional protection
24 for the taxpayer against losses from sale
...
4 (E) EXERCISE PRICE.—The exercise price
5 for any warrant issued pursuant to this sub6
section shall be set by the Secretary, in the in7
terest of the taxpayers.
Here is a diary explaining how stock warrants would have worked under
Dodd's Draft from a few days ago