TED the Man

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Huge tip of the hat to the always excellent Epicurian Dealmaker for describing, in simple terms, the latest effort by the Banks to screw taxpayers out of billions. Although I strongly recommend reading the whole article, I will try to summarize for those of you who avoid technical reading on Fridays:

Back when the Banks were still required to keep score, they were forced to accept federal bailout money to avoid bankruptcy. In exchange (and having little else to offer), they accepted to give up some of their potential future upside, in the form of hugely out-of-the-money, long-dated warrants to the government (who would expect us to see C back at $15 in our lifetimes, anyway?).

Soon thereafter, they realized that by accepting this money they had given up much more than their future upside (namely the control of their compensation committees). So they started intense lobbying to be allowed to stop keeping score (mark-to-market is the technical term), in order to fix their little balance sheet situation, return the money, and regain their freedom (to compensate themselves at will). Unfortunately, by achieving this, they started facing a slight unintended consequence: as the shares begin to rebound, the previously thought worthless warrants are becoming not-so-much-out-of-the-money, and the prospect of becoming quite valuable at some point in the future not so fictional. So guess what? They are now lobbying to be allowed to return the money and get back their warrants for nothing, on the groungs that they are currently worthless!!

I am anxiously waiting the result of this effort to add it to my list of banking miracles...
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