At one point, it looked there would be an agreed-upon bailout plan. But then it all fell apart, leaving the fate of the plan up in the air. The combatants will try again today. At the White House, a surprise proposal was floated by John Boehner of Ohio that featured a smaller role for government. After that, the optimism that a deal could be reached seemed to fade.
According to the New York Times, Treasury Secretary Henry Paulson literally kneeled by House Speaker Nancy Pelosi and asked for her support. It seems that most participants in these talks are supportive of a mechanism that will allow the government to limit executive pay at participating companies, and gain an equity stake in some cases. But there are some huge issues still outstanding.
When you get right down to it, the biggest issue remains valuation. At some point, the folks over at the Treasury will have to decide how much they are going to pay. They may seek some outside consulting with this complex task. Bill Gross? There are many securities out there that conceivably could be purchased. You have to wonder if any negotiation will be allowed. Banks will want as much as they can get, in part to avoid writedowns (depending on how they are valuing the debt currently). The government certainly runs a big risk of capital losses, though equity stakes ameliorate that risk a bit. All in all, it's fair to say that success is not guaranteed. On top of all that, it will be interesting to see if any controls on Treasury are built into the system.
For more:
- here's a New York Times article
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