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Dear Hanky P. And Inkjet Bennie



April 07, 2008 – Comments (6)

This is how you bail out a bank.

You don't just hand it a wad of taxpayer-generated cash and say "Go ahead and whizz it away in any fashion you see fit!" You get concessions for your dough, a good payback, and a seat at the table to ensure that the money isn't wasted like the torched cash that preceded it.

"The funding from the TPG-led group, the Journal reported, would be structured as an offering of both common and preferred shares of Washington Mutual. In addition, TPG would receive a seat on the company's 14-director board."

End Communication.

6 Comments – Post Your Own

#1) On April 07, 2008 at 11:47 AM, abitare (29.72) wrote:

I like how everytime a company issues more shares of a stock (LEH, WM) the stock rallies? This is the opposite of what I was taught in school. I guess the supply / demand curve was just BS.....

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#2) On April 07, 2008 at 12:27 PM, TMFBent (99.48) wrote:

No, the supply of brains curve is just a bit absent from the market, especially regarding banks and homebuilders.

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#3) On April 07, 2008 at 12:33 PM, leohaas (29.49) wrote:

Bent, I agree!

abitarecatania, it may sound counter-intuitive, but these kinda stock issues are actually good news. WM's stock price before the share issue was low because of the risk of bankruptcy. After the issue and TPG buying those shares the risk of bankruptcy has diminished significantly. That is what is reflected in the price.

Another way of looking at it is that supply has increased, but so has demand. After all, TPG is buying all newly-issued shares. 

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#4) On April 07, 2008 at 2:48 PM, TMFBent (99.48) wrote:

It's still odd to see people excited to get their ownership stake watered down. But yeah, it's the belief that "whew, at least they won't be bankrupt next week."

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#5) On April 07, 2008 at 3:43 PM, mandrake66 (51.21) wrote:

I generally like to ascribe it to massive short covering, because that is the only thing that makes sense to me, but it's hard to believe that that is always the cause.

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#6) On April 07, 2008 at 10:31 PM, GS751 (26.93) wrote:

check the books and see what most of the trades are.  A lot of short covers tend to be market orders.

 Bernanke Bernanke you kicked in my stop's on some of my short positions bail me out bail me out.

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