Date 2008/10/14 17:00:00 | Topic: International News
$125 Billion to 9 Banks The U.S. plans to buy $250 billion in perpetual preferred stock in an undetermined number of banks with $125 billion going to nine top banks. Here's how much these banks will get and their stock price rise in pre-market:
* Bank of America (NYSE: BAC) ($25 billion) +9.7% * Citigroup (NYSE: C) ($25 billion) +14.9%
* JPMorgan Chase (NYSE: JPM) ($25 billion) +5% * Wells Fargo (NYSE: WFC) ($25 billion) +6% * The Goldman Sachs Group (NYSE: GS) ($10 billion) +10% * Morgan Stanley (NYSE: MS) ($10 billion) +18.5% * Bank of New York (NYSE: BK) ($2 billion) +6.5% * State Street (NYSE: STT) ($2 billion) +5.5%
What does the government get in return for this capital? It gets perpetual preferred stock that receives dividends plus warrants to buy some stock. Specifically, the perpetual preferred earns a 5% interest rate that will rise to 9% after five years. The warrants will be worth 15% of the face value of the preferred -- e.g., a $25 billion investment, will grant the government $3.75 billion in warrants (although it's not clear at what price those warrants would be exercised). If the stock goes up, taxpayers can profit.
