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I don't get it. How converting to common stock 'allow the government to "shore up the nation's banking system without having to ask Congress for more money any time soon, according to administration officials."'
Converting from preferred shares (which pay dividends at a set rate and which come before common stock for any proceeds should there be liquidation) doesn't do anything to add to a banks capital (other than through the forgoing of dividends on the preferred shares...which is then just a gift to the banks at taxpayer expense), it just moves capital from one ledger entry to another. Sounds like three-card Monte to me, and the taxpayers are the mark.
Krugman has a slightly different take but also makes the point that this does nothing to shore up the banks.
Copy and paste the link...
http://krugman.blogs.nytimes.com/2009/04/20/preferred-shares-to-common-equity-an-analogy/
...or click my sig for the full post
