Imagine an announcer came on TV and said, "Welcome to the 2008 Bank Telethon. You've heard all the horror stories. Now, with the holiday season approaching, I know you'll want to reach deep into your pockets to lend a hand."There's one thing very wrong with this description. We did not give $250 billion to the banks, we invested that money in the banks—and against the banks' will in some cases. A better description would be if every American household bought $2000 in newly issued bank stocks.
"I know what you're wondering: How much should I give? Well, the banks need $250 billion. I know—that sounds like a lot of money to raise in just one telethon. But if each household in America gave just $2000, then we could reach our goal. So let's get every household in America to pledge $2,000 to the banks so that they can start lending again."
If that were the announcer's pitch, would you give the $2,000?
Guess what. You just did.
Saturday, October 18, 2008
Here's an interesting way to think of the $250,000,000,000 equity injection into America's banks: