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The government will increase a troubled bank's capital by purchasing preferred stock that pays a 9percentt dividend.
This comes just a little over a month after DST invested $200 million in Facebook, purchasing preferred stock that valued the company at $10 billion.
With AIG back in the headlines this week, the purpose of this post is not to argue for or against continued bailout money, or whether it's in the form of purchasing preferred stock or buying up bad assets.
The Treasury has stuck to purchasing preferred equity to minimise the risk of loss and avoid having any say in running the bank.
In November, as confidence continued to erode, Paulson abandoned plans to buy troubled assets under TARP and instead launched a plan to recapitalize financial firms, mostly by purchasing preferred shares of banks.
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But when TARP purchased preferred stock and warrants, it bought them from holding companies, not their bank subsidiaries.
Small-Business Lending Fund In short, Treasury can purchase preferred stock and other debt instruments from small- to medium-sized financial institutions in return for which the bank has an incentive to make loans (over and above current lending) to small businesses.
Few buyers were willing to make daring purchases, preferring the established work of Modernists, such as Alexander Calder, over that of reigning art superstars, such as Damien Hirst and Takashi Murakami.
The Treasury can replenish this loss with a purchase of preferred stock.
And that near-term plans for expansion include adding a personalized "Recommended Deals" vertical, a la Amazon, that serves recommendations based on users' purchase history, preferred category, price range, location, etc.
Non-dairy cream can be purchased if preferred.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com