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Author: jeffbas Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1568  
Subject: Tom Gardner's suggestion Date: 9/26/2008 12:50 AM
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I agree with his suggestion to write our representatives. Here is what I sent to the Senate Banking Committee 24 hours ago:

I have noted many concerns about the $700B financial rescue plan, and wanted to share mine.

Any Wall Street deal giving a company cash for debt where the debt is risky will always include significant warrant coverage (an equity-based interest in the company). That is because for a certain portion of these deals the debt will not be repaid. You have to get very good returns, from the warrants, on the ones which pay off to make up for the ones which do not.

Secretary Paulson, a top Wall Street guy, knows this like the back of his hand. If we, as taxpayers, do not get "warrant coverage" from the financial institutions for taking over poor quality debt, whose value is very uncertain, this proposal is in my opinion a scam on the taxpayer. This should not and needs not be a transfer of wealth from the American taxpayer to the stock and bondholders of troubled financial institutions, but something that creates a financial system "timeout" and has the potential to cost the taxpayer very little.
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