The money PIT

The 'Lest we forget' post referenced all the ARMs that are coming up to reset soon, and that the housing crisis was nowhere near done. Well, apparently the government is planning to get in on the act and extend massive assistance to up to three million home owners... Quote: "... Under the program being discussed, the lender would agree to reduce borrowers’ monthly payments, for example by lowering the interest rate or principal of a mortgage loan, based on the homeowner’s ability to pay. These reconfigured loans could help homeowners avert foreclosure. To attract financial institutions to the program, the government would then guarantee to repay the lender for a portion of its loss if the borrower defaulted on the reconfigured loan ..."

Why doesn't the government help all homeowners by eliminating the "I" in "PITI?" PITI, also known as principal + interest + taxes + mortgage insurance, is the monthly payment that most folks pay (when taxes and mortgage insurance are escrowed in their monthly payment). Since the mortgage insurance doesn't exactly seem to be insuring anything - see yesterday's 'Repeat question' entry - perhaps it could be eliminated across the board, saving homeowners a few bucks?!?

Stupid headlines...

'Iran Has Potential WMD Capabilities, Reports Say' ... no kidding, exactly which country doesn't have "... potential capabilities for X (insert scary item here) ..."

'Canada Preparing for WMD Strikes at 2010 Olympics' ... who knew that the Canadians had WMD? Or that they wanted to target the Olympics? Just kidding!

Only 4 days!

Thank goodness! Only 4 more days of incredibly stupid commercials... Every day (Ed. note: this blogger has the misfortune to live in a "battleground" state) it seems like one of the political commercials aired that day wins the booby prize, only to be topped by another political ad the next day! The worst aren't from the candidates, they seem to be from both the Republican & Democratic National Committees and affiliated organizations (e.g. the Democratic Senatorial Campaign Committee, etc.)

Repeat question...

OK, so this blogger wondered aloud (in the 'Confused, and nowhere to go...' post on September 24th) re PMI, viz.:

"... When this blogger bought his house (at the height of the bubble!) he was assessed PMI, private mortgage insurance, because he only put down slightly less than 20% of the value of the home. This is insurance that protects the lender - if the borrower defaults and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property then the insurance kicks in. OK, since the vast majority of near- and sub-prime loans probably have a loan-to-value ratio appreciably above 80% they would all require PMI. So, how come this blogger has not heard word one re PMI. Looks like the banks should be covered and that it would be the insurers that are screaming about "toxic waste"! However, they don't seem to figure into any of the articles and news - are Messrs. Bernanke and Paulson bailing out the banks or the insurers?..."

He is still wondering... and hasn't seen any mention of PMI anywhere in any of the multitudinous articles on the housing and financial crisis... PMI is, by definition, "... insurance to offset losses in the case where a mortgagor is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property..." If most/all of the defaulted and delinquent houses had PMI, are not the banks and financial institutions fully covered against losses?? True, they lose the income stream generated by the regular mortgage payments, but if they unload the property at a loss with PMI isn't the insurer is obliged to step in and make the bank whole? So, why are the banks hurting? How is the net, bottom line, effect of this any different from a hypothetical where the homeowner wins the lottery and pays off his/her mortgage in full? In both cases the payment would pass through and that mortgage would have to be 'retired' from the mortgage-backed security in which it was bundled with hundreds of other mortgages...

There's got to be something here that this blogger is missing... It seems to him that if there has been a big uptick in foreclosures (and there has) then it should be the insurance companies that are in a world of hurt and not the banks!

Gaza smuggling

Photo credits: Reuters

The Tunnel Kings of Gaza - "... Gasoline, rice, light bulbs, Viagra, even brides: most things can be smuggled into the closed-off Gaza Strip through tunnels dug under the Egyptian border. Entrepreneur smugglers make a fortune from the region's economic crisis -- but it can be a deadly business for the tunnel diggers... Some 750 tunnels have been dug under the border. The figure is known pretty exactly because the Rafah town council decided it wanted a piece of the action and last month forced all the tunnelers to register and start paying a tax of €2,000 per tunnel per year ..."

Note: the 'Unbelievable' post from August 10th noted that the animals (including the lions!) in Gaza's 'Heaven of Birds and Animals' zoo had all been smuggled into the Gaza Strip via these tunnels...

In pictures: Gaza's tunnel smugglers (photos)
The secret tunnels of Gaza (short video)
Gaza Tunnel Smuggling (photos)
In pictures: Tunnels under Gaza (photos)
Underground cattle trade thrives in Gaza tunnels

Iran and nukes

New web site which "... seeks to make available in a single location a broad array of information about Iran's nuclear program, from its history dating back to the 1960s, to the ongoing swirl of diplomatic activity aimed at halting its uranium enrichment activity, to commercial satellite imagery and ground photos of nuclear-related sites..." ISIS Nuclear Iran

Up or down...

If anyone, most especially a politician, uses a day's (or even week's) movement of the Dow Jones Industrial Average or S&P 500 Index to support a financial or economic argument, then you immediately know that they are either a fool or a knave!

Science and side effects...

Photo credit: Radio Sai

The above is an old picture of the Parsi towers of silence in Bombay (now Mumbai), India. You can tell it's an old photo by the number of vultures... Living there in the '70's and '80's you could always see a very large number of vultures riding the thermals. However, during the '90's the vulture population declined by over 95%. Scientist and ornithologists looking into this found that the cause of this die-off was the drug diclofenac.

The science:

Cheap diclofenac was widely used across the Indian subcontinent as a pain reliever for livestock. If the livestock died and were eaten by vultures (which was very likely, as vultures were the main "cleaners" of carrion) the diclofenac then caused renal failure in the vultures, leading to their deaths.

The side effects:

• Without the vultures to clean up, the carcasses of dead animals are left to rot, and the population of wild dogs has skyrocketed. "... A research programme led by Anil Markandya of the University of Bath, UK, has calculated that the decline of vultures made way for at least 5.5 million extra feral dogs in India between 1992 and 2006. During this period, these extra dogs would have been responsible for at least 38.5 million bites. National surveys show that in India 123 people die of rabies per 100,000 dog bites, suggesting that a minimum of 47,300 people may have died as a result of the vulture die-off. Taking account of the cost of treating bite victims and dealing with the extra deaths, the researchers calculate that the use of Diclofenac has indirectly cost India an unforeseen 34 BILLION US Dollars in extra health costs ..."
  
• Additionally, this has played havoc with the way Parsis dispose of their dead. "...The Zoroastrian system for disposal of dead bodies is ... based on the principle that the elements, fire, water, and earth must never be defiled and be maintained pure. It is thus enjoined that after death, the body of the person must be disposed of in such a manner as not to defile the elements or to injure the living. Large voracious birds like vultures would eat the flesh and sinews, leaving only the skeleton. The bones remained exposed for a year until they became quite dry. They were then buried as “bone meal manure” in fields; no tombs were permitted on the spot. The distinguishing features of the system are: Speedy disposal of the fleshy parts. It takes about 25 minutes for the birds to finish the corpse, It is economical in the sense that disposal by birds costs nothing and is free, It has the element of charity in offering food to hungry birds, and it displays the ideal of equality. The remains of the rich and the poor lie side by side... In keeping with this ancient custom, the Parsis of India erected enclosures known as Towers of Silence, within which the bodies of the dead are disposed of in accordance with stipulated procedures. In the Towers, vultures come and eat the flesh ..." The dying off of the vultures has seriously disrupted this custom, and other scientific methods are being tried to maintain the custom e.g. using solar reflectors to speed decomposition, using ozone-generators to fight the smell, etc. Plans are also afoot to breed vultures in captivity for this purpose.

Bottom line: an unexpected side effect, and another example of the "tragedy of the commons" and externalities/spillover costs...

Taking it back...

"... Au cours d’une interview accordée à la chaîne iranienne Press TV, le chef du Rassemblement Démocratique et Dirigeant du PSP Walid Joumblatt a estimé que l’établissement de bonnes relations diplomatiques entre le Liban et la Syrie est un pas très positif, indiquant que ses anciennes accusations contre le régime syrien sont des paroles lancées dans un instant de colère. « Dans les moments d’indignation, on est capable de dire n’importe quoi sous le coup de l’émotion » a-t-il affirmé ...»

Ed trans: "... During an interview given to the Iranian chain Press TV, the leader of the Democratic Gathering and the PSP, Walid Jumblatt said that the establishment of good diplomatic relations between Lebanon and Syria is a very positive step, indicating that his old accusations against the Syrian regime were words spoken in a moment of anger. "In moments of indignation, people are capable of saying anything under strong emotions” he said… "

Although in the article he appears to be talking mostly about Hezbollah, he might also be referring to statements like this (this one about Bashar al-Assad) "... We have come to Freedom Square to tell you, oh tyrant of Damascus, you ape unknown to nature, you snake from which even the snakes have fled, you whale vomited by the ocean, you wild desert beast, you creature that is only half-man, you Israeli product at the expense of the corpses of the South Lebanese, you liar and arch-killer in Iraq, you criminal blood-shedder in Syria and Lebanon”

Great quotes...

"... The raid by U.S. helicopters on Syrian territory... constitutes a violation of Syrian sovereignty and thus is a dangerous, unacceptable attack that we condemn. Any military attack against an Arab country or on a small country by a larger country is an act we reject ..." - Lebanese Prime Minister Fouad Siniora on the U.S. cross-border raid into Syria which killed eight...

Le Liban officiel condamne à l’unisson le raid héliporté US contre le territoire syrien

Last chance...

In a September 9th entry, 'McCain's hope,' this blogger pointed out that short of a game-changing event, Senator McCain's only hope was if the American public deliberately opted for divided government (given that the Democrats will increase their majorities in both houses).

'As expected' from September 21st noted that George Will had made this an explicit argument to vote for McCain.

Now in 'John McCain's last chance' The Economist does the same -"... Second, Mr McCain should hammer away at the dangers of single-party rule in Washington, DC. The Democrats are likely to add at least another ten seats, and perhaps as many as 20, to their majority in the House. There is a real possibility that they may attain a 60-seat filibuster-proof majority in the Senate (Democrats are leading in eight Senate seats currently held by Republicans and are close in a couple of others; they control 51 of the 100 seats already). This will allow them to push through a wish-list of Democratic proposals on everything from “fair trade” to spending. The Republicans have only just started to point this out. But Americans have a strong preference for divided government. America has only had one-party rule (with the same party controlling the White House and both chambers) for six years out of the 28 since Ronald Reagan’s election in 1980—two years under Bill Clinton and four and a bit under George Bush. Mr McCain should argue forcefully that, as an experienced legislator who has worked with left-wing Democrats as well as right-wing Republicans, he will be the perfect man to check Congress where necessary and work with it where desirable ..."

Finally, Senator McCain has also taken up this argument, "... Republican presidential nominee John McCain , trailing in the polls, raised the prospect on Saturday of a complete Democratic takeover of Washington as a reason to elect him over Democrat Barack Obama in 10 days... McCain said having Democrats in control of the White House, the U.S. House of Representatives under Speaker Nancy Pelosi of California and the Senate under Majority Leader Harry Reid of Nevada, would give Democrats unfettered power ..."

Hah!

Great quotes...

"For a man who was once remarkably hard to decipher, Alan Greenspan is now as clear as an empty Lehman Brothers office." - Steve Goldstein, MarketWatch commentary team on Alan Greenspan after his Congressional testimony.

All together now - II

All (43) posts to date on the housing/financial crisis...

Lest we forget... - October 27th
One possible reason... - October 27th
Great quotes... - October 27th
Thank you California and Florida - October 26th
The elephant (and donkey) in the room - October 25th
Great quotes... - October 25th
Say what? - October 22nd
Crisis unfolding - October 21st
Once, squared, cubed - October 8th
Mortgage mess - October 7th
Crash victims... charities - October 6th
Executive compensation (Section 111) – October 4th
MOAB – October 4th
Quotes… (updated) – October 4th
Fingers crossed – October 4th
Great quotes – October 2nd
Wall Street vs. Main Street – II – October 2nd
Wall Street vs. Main Street – October 1st
Yet another plan (Soros) – October 1st
Ouch – II – October 1st
Ouch – September 30th
All about CDSs – September 30th
Genius! – September 30th
Crisis expanding – September 29th
Great quotes – September 27th
Redefining “too big to fail” – September 27th
Crashing the party– September 27th
Rough Landing – September 25th
Confused and nowhere to go (updated) – September 24th
Street-wise – September 24th
One can dream – September 23rd
Government bailouts – September 23rd
What it took – September 23rd
Truth RIP (updated 9/22) – September 22nd
Vox clamantis in deserto – September 22nd
Finely calibrated reactions – September 16th
Fannie and Freddie – September 10th
Fannie Mae and Freddie Mac – July 24th
Mortgage meltdown (update) - April 1st
Mortgage meltdown – March 31st
Housing Stories III – July 29th
Housing stories – II – May 6th
Housing stories – April 5th

Lest we forget...

Lest we forget, the current crisis was started by the bursting of the housing bubble... In all the hubbub re TARP; assisting the banks, bank holding companies, and the insurance companies, etc. it is easy to forget that housing prices are still going south in many parts of the country. And the subprime mess is not over!

An estimated "... half a million mortgages, worth about $110 billion, will have their intro "teaser" interest rates reset over the next six months, according the latest available data from First American CoreLogic, a mortgage industry research group..." (see 'The next wave of foreclosures'). And "... a large number of borrowers still on the low "teaser" rates are already falling behind on payments -- one in seven is between 30 and 90 days late, according to HUD. The figures are worse for mortgages whose rates have already changed -- more than a fifth of those are behind. These borrowers have not yet gone into foreclosure, but if they do not start to make repayments, they might ..."

One possible reason...

'Crisis unfolding' summed some of the criticisms leveled against the way the Treasury Department is structuring the first USD 125 billion it was providing to nine national banks... News reports have indicated that "... Nine of the largest U.S. banks were essentially arm-twisted last week into signing on for the first $125 billion in capital infusions ..." so apparently some of these banks did not want to participate and were muscled into doing so.

First, does it make sense that all of these banks need bailout money? After all, JP Morgan Chase acquired Bear Stearns and WaMu when those two companies failed, while Bank of America purchased Merrill Lynch. All of these transactions occurred with government approval and assistance (see 'Redefining "too big to fail"'). If JP Morgan Chase and Bank of America both were in jeopardy themselves then why would this have been allowed? Answer, presumably they were not in real jeopardy... and do not need their TARP assistance!

So, why did the Treasury twist their arms to accept these 'investments' of capital? The only plausible reason could be so as not to signal to the market which of the big national banks were vulnerable and which were not (because, presumably, savvy folk would immediately shift their money from the 'weak' to the 'strong', and thus the 'bailout' would bring about precisely the effect it was trying to avoid!). OK, this being the case, the Treasury obviously could not put too onerous a set of conditions on the capital infusion (otherwise no amount of arm twisting would have succeeded in getting them all to participate!).

The second USD 125 billion tranche will be going to approximately 20 regional banks. Here the Treasury initially was going to announce which of the regional banks would be 'applying' for help. However this was put on hold for the same reason (i.e. fear of signaling the 'weak' and the 'strong') and a decision was made to let the banks make the announcements themselves.

Much concern exists re what criteria the Treasury will use to determine which banks will be helped and which will not... Already the Treasury refused to help National City (Cleveland, OH), which then had to sell itself to PNC for USD 5.58 billion (Note: PNC itself is the recipient of USD 7.7 billion from the TARP, so PNC appears to be using the TARP money for the acquisition vs. the stated reason for the TARP i.e. to unblock the credit freeze and promote lending...)

And now the latest is that apparently insurance companies are also going to be included in the MOAB... At this rate it does not appear that the original USD 700 billion will be enough...

Great quotes...

R.D.S: btw-that deal is ridiculous

S.M: I know right.. model def does not capture half of the risk

R.D.S: we should not be rating it

S.M: we rate every deal

S.M: it could be structured by cows and we would rate it

R.D.S: but there’s a lot of risk associated with it – I personally don’t feel comfy signing off as a committee member.

Instant messaging exchange between two Standard and Poor's employees...

The credit ratings agencies were the ones giving high credit ratings to securities, even when it was not warranted...

"... Moody's and S&P, public companies, get fees from their clients (the banks that packaged the securities) for grading the securities. And starting in 2000, Bloomberg reports, the companies began aggressively shifting their focus from informing investors to drumming up business. The easiest way to do that was to keep the client happy, and nothing made a client happier than a AAA credit rating, the gold standard. And how to arrive at that AAA rating? As one former S&P senior analyst puts it "My mandate was to find a way. Find the way."..."

For additional perspective on the role of the credit ratings agencies (Standard & Poor's, Moody's, Fitch...) in the subprime mess read the links below:

Insiders Detail How Bottom Line Drove Credit Ratings
Bringing Down Wall Street as Ratings Let Loose Subprime Scourge
`Race to Bottom' at Moody's, S&P Secured Subprime's Boom, Bust

Nobel prize in econ...

October 13th, the "Nobel prize in Economics" was awarded to Paul Krugman "for his analysis of trade patterns and location of economic activity."

Quote: "... Patterns of trade and location have always been key issues in the economic debate. What are the effects of free trade and globalization? What are the driving forces behind worldwide urbanization? Paul Krugman has formulated a new theory to answer these questions. He has thereby integrated the previously disparate research fields of international trade and economic geography. Krugman's approach is based on the premise that many goods and services can be produced more cheaply in long series, a concept generally known as economies of scale. Meanwhile, consumers demand a varied supply of goods. As a result, small-scale production for a local market is replaced by large-scale production for the world market, where firms with similar products compete with one another ..."

Krugman has been tipped as a future winner for some time, so no surprise here. As an economist he is great, as a political commentator he sometimes is a total hack e.g. see the 'Truth, RIP (updated 9/22)' blog entry...

The Conscience of a liberal - Krugman blog at the NYT.

The US Army and conservation...

Partly in response to recent legislation (the FY 2009 National Defense Authorization Act, that requires that the president appoint a Director of Operational Energy Plans and Programs to designate a senior responsible official in each service, while coordinating their multiple energy programs) the U.S. Army has decided to launch an initiative to reduce its huge energy needs... A Senior Energy Council has been created, to be co-chaired by the Assistant Secretary of the Army for Installations and Environment and the Vice Chief of Staff (currently Keth Eastin and General Peter Chiarelli respectively).

Per the Defense Science Board, in FY 2006 the Department of Defense consumed 110 million barrels of premium fuel and used 3.8 billion kilowatts of electricity (total cost USD 13.6 billion). Understanding that much of this occurs at fixed installations (bases, etc.) the Army plans to work on converting army bases from their current state as energy consumers to net energy producers within 15 years e.g. by installing wind, solar, biomass, etc. generators to power the bases and to provide excess energy to nearby towns.

U.S. Army launches energy drive
Army Launches New Energy Initiatives
U.S. Army's energy initiative announcement
US Army gets eco-conscious, preps mega solar plant
Army Launches New Energy Initiatives, Test Projects at Posts

Zombies

Picture Credit: Steve Yanoviak/University of Arkansas at Little Rock

'Zombie animals and the parasites that control them' has some amazing pictures and stories, for example:

"... This spider, Plesiometa argyra, is an expert builder of perfectly round webs. But with one sting, a parasitic wasp can take over its mind. The wasp deposits its larvae inside the spider's body, along with a new blueprint—instead of building its web, the spider spends the last night of its life constructing a silk cocoon, which becomes a home for its killers. When the silk sack is done, the larvae kill the spider. Then they take up residence in the cocoon, suspended safely above the predators of the rainforest floor..."

"... Turn over a piece of wood in your yard and you might find pill bugs on the bottom, hiding from birds who consider them a tasty treat. Parasitic spiny-headed worms that live in pill bugs, however, need the birds to find them: While the worms grow up inside their pill bug hosts, they can't reproduce there. Instead, they need to be in the belly of a starling. To achieve this goal, the worm gets control of the bug's brain and makes it crawl out into the open. When a bird gulps down the pill bug, the parasite can move through another step of its life cycle...."

... and a number of other amazing examples...

Next up at the trough...

Farmers have been doing well for a number of years (see graphic below). For example , this year U.S. net farm income is projected at USD 95.7 billion, up 10.3% from last year and up 65% from two years ago (per U.S. Agriculture Department estimates).... However, with the costs of some inputs rising (e.g. fuel, fertilizer, seed, etc.) and some crop prices weakening the outlook is a little less rosy.

Prediction: if there is a slight downturn in the next 12 to 24 months expect to see copious lamentations about the fate of the family farm and Congress rushing to the 'rescue.'

Great quotes...

"He was someone whose word you could rely on. As we say in the infantry, this is a guy you can take on a long patrol." - Colin Powell, referring to Senator Ted Stevens (R-AK), currently on trial for mis-reporting gifts...

"I can assure you his word is good enough to take to the bank" - Senator Daniel Inouye (D-HI)

Ted's Connections @ Retire Ted
Most Corrupt Spotlight: Senator Ted Stevens
Stevens Verdict Pushed Closer to Election
Ted Stevens for Alaska
Senator Charged With Lying About Gifts
USA vs, Theodore F Stevens (indictment) - PDF file

Computer simulations... and cancer

Graphic credit: Forbes

"In her laboratory at the University of Washington, mathematician Kristin Rae Swanson peers into the future of brain cancer patients--on her computer screen. She has created a software program that uses data from magnetic resonance imaging scans to simulate how fast a patient's brain tumor is likely to spread. She can pinpoint with uncanny precision where a tumor will grow months ahead of time and predict how long a patient is likely to live under various treatment scenarios ..." Read the rest here in Forbes...

Thank you CA (and FL)

Percentage of California mortgages in non-Fannie/Freddie mortgage-backed securities: 34%

Graphics credit: USA Today

The elephant (and donkey) in the room

Congress has held further hearings into the causes of the current financial crisis. The latest to be hauled in front of either Senate or House panels were the heads of the ratings agencies, and the former head of the Federal Reserve, Alan Greenspan (along with the former Treasury Secretary John Snow, and the current SEC Chairman Christopher Cox).

'Crashing the party' noted that the ratings agencies should figure among those with some responsibility for the crisis. Their turn came when the House Oversight and Government Reform Committee held a hearing to grill the heads of Moody's, Standard & Poor's, and Fitch Ratings.

Greenspan was hauled before the House Oversight Committee, where his reception was significantly less deferential than in past times...


So, Congress has held a number of "show trials" to grill many of those that have had a part in the run up to the current crisis... However, they have not yet shown a willingness to take a look at their own (significant) role in this crisis... This bunch of 'Louis Renaults' are "shocked, shocked" at what happened and are busy rounding up the usual suspects...

Great quotes...

"... Treasury is committed to an open and transparent program with appropriate oversight ..." - Neel Kashkari, Interim Assistant Secretary for Financial Stability, in remarks to the Institute of International Bankers, October 13th. (Part of the TARP...)

However, as shown by the links below, multiple documents released by Treasury have significant portions blacked out or redacted, for example the amount that will be paid to the Bank of New York Mellon to keep the books for the government’s purchase of toxic securities....

Blacked Out
The End of Bailout Transparency Already?
More bailout contracts contain blacked out portions
Why are Docs From the Bailout Being Redacted?

Newspaper endorsements...

Neat interactive map of newspapers across the United States that have editorial endorsements of either Senator Obama or Senator McCain for president, along with their 2004 endorsement and circulations...

Say what?

The Wall Street Journal reports that "Federal prosecutors probing the collapse of Lehman Brothers Holdings Inc. have subpoenaed other Wall Street securities firms, seeking information about whether their analysts were mislead by Lehman about its financial health, according to people familiar with the matter ..." OK, let me get this straight, the Feds are asking securities analysts if they totally screwed up their analysis or if they were 'mislead' by Lehman (a defunct firm) employees. Hmm, let me think a moment... which answer are they more likely to give?

Europeana

The EU is launching a web site, Europeana (in November) to create a digital, on-line encyclopedia cataloging European culture. "... What an EU commissioner has in mind is a rich digital encyclopedia of Europe's cultural heritage. "Europeana" is an ambitious project to digitize large portions of the continent's national libraries and put as much of European civilization as possible -- books, maps, paintings, photos, films -- online for free ..."

EU Plans Backup Copy of European Civilization

Crisis unfolding...

The MOAB ("mother of all bailouts") proceeds apace. Treasury Secretary Paulson has dipped into his $700 billion piggy bank and is injecting capital directly into a number of banks - USD 125 billion to nine major banks. He is being criticized for being too "kind" and making this almost a 'no strings attached' infusion, since in return the government gets non-voting, non-convertible, callable, preferred shares that have a poor dividend rate. The criticisms include:

• The government gets no seats on these institution's boards (as opposed, for example, to others who have similarly invested in some of these banks e.g. Mitsubishi UFJ, a major Japanese bank, that will be investing USD 9 billion in Goldman Sachs...)
  
• These preferred shares are non-convertible i.e. can not be converted into common shares
  
• They are also callable in three years, at terms favorable to the banks...
  
• They pay an interest rate of only 5% (Warren Buffet got a rate of 10% for his similar investment)
  
• The plan does not require that the banks suspend dividend payouts (presumably if the banks are in a weak credit situation it doesn't make sense for them to payout to shareholders...)