What does the bailout mean in terms of bank security? Is my money safe?
The federal ‘bailout’ provides the Troubled Assets Relief Program (TARP) money for additional capital and gives individuals and businesses confidence that the fundamental banking system is sound. As the program was initially laid out, the government would have bought bad assets off banks’ books. It was reworked so the government will receive an equity position in addition to the loan it puts in so companies have sufficient capital to weather the storm. And, in return, the government gets a preferred dividend yield — a return interest. The term ‘bailout’ is a misconception. This is an equity play and, in the long-run, the government will make money on this transaction and that’s important for people to understand. The plan streams capital into the banking system so it can recover and, in effect, pass that capital through businesses to help prop up the economy. In return, the government collects interest on its investment and receives an equity return in the form of stock warrants. So, i
