Questions linger about the bailout; what about equity?

There are lots of questions about the massive government bailout plan. You can expect the opposition to crank up their efforts. One of the biggest issues--a potential deal breaker--boils down to what taxpayers get in return for the $700 billion to be used to buy up toxic assets. As of now, there is no provision that would give any equity to the government (and thus taxpayers). That strikes many as a huge blunder. Some have raised the idea of requiring banks to give contingent shares to the government. That would require the value of the contingent shares to equal the value of the assets purchased by the government. That, in turn, would give the government some upside, which strikes some as a good idea. There is precedent: Sweden grappled with a similar crisis by forcing the banks to issue warrants to the government. That really reduced the total costs of the plan.

For more:
- here's an AP article
- here's a New York Times article on Sweden

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