The Bailout Bill: How Your New $2324.50 Investment Will be Spent

Well it seems we are all long this Bailout to the tune of $2324.50 per person. Here is what I think about my new investment in Bailout Co. Inc.

--Provides the government with warrants to obtain an equity stake in companies. This helps ensure that taxpayers share in future gains of companies that are bailed out.

We might find that the American people will now own some Morgan and Goldman shares before too long. I think JP Morgan may also get rid of some of WaMu's bad debt in this thing as well. In fact I think all Americans may be long financials here before too long. In other words it might just be Unamerican to go short financials for the next couple of years.

--Limits excessive executive compensation for some companies. Any firm that sells more than $300 million in troubled assets to the government is also subject to more taxes.

I bet some companies may cut off their bad debt sales at $300 million in order to not have to pay higher taxes. Hopefully the government buys only the good stuff and not the trash.

--Establishes an oversight board and special inspector general to act as a watchdog.

There should be oversight as long as this guy doing the work isn't some unqualifed person like Senator Christopher Dodd. I think they need to hire an outsider or maybe some "Wall Street Fat-cat."

--Requires the Treasury secretary to regularly report to Congress the details of all financial transactions under the bailout.

This better be available to the American public as well. I want to read the 10Q on my new investment each quarter in order to see if I need to hedge it or not.

--Allows federal agencies to modify troubled mortgage loans.

I wonder how this will work? I guess it is fine as long as it isn't judges doing the work.

--Expands the amount of government insurance on individual bank deposits from $100,000 to $250,000.

This one is a no-brainer issue that really doesn't cost the government a penny as long as there aren't any more bank failures. It might make some Americans concentrate their money at one of the surviving 4 big banks.

--Gives the chairman of the Securities and Exchange Commission the authority to suspend mark-to-market accounting and requires the agency to complete a study on the effectiveness of this accounting method.

This seems like a pretty meaty proposal that will allow some banks to hide what bad debts that are still on their books until house prices come back up. I think this may be the lasting legacy of the bailout as firms can again bury their bad debt without rating agencies torpedoing their credit ratings. This means that all the big write-downs we have seen this past year may be over for the time being.

--Requires the president five years from now to devise a plan to recoup net losses, if there are any.

I think in 5 years this plan may be running a pretty decent profit since house prices will be rising by then. Also if the government is long financials they may be able to catch an economic recovery as well. I'm sure the Government will give it back the the American people in the form of a big tax free dividend check. *hint hint* Too bad that wasn't written into the bill because it would have been sweet.

--Gives companies the opportunity to insure their troubled assets rather than selling them, although this is up to the discretion of the Treasury secretary.

They actually threw the alternate plan that would fail on its own into the bill as well? I guess most companies will now sell $300 million in bad debt and then insure the rest if they want to avoid that troubled asset tax. In the meantime they will mark everything to maturity and heal their balance sheets over night. I will be following their 10Qs carefully since I (and all other Americans) now have a stake in seeing this thing succeed.