Hey buffett, would have to disagree because if this bailout is targeted at saving jobs, and some incentive for the u.s taxpayer i.e. It includes a provision to give taxpayers equity stakes in the companies that benefit from the plan.
The bill has a section aimed at limiting the pay of executives at companies that take advantage of assistance by prohibiting tax deductions for officials that exceed $500,000, which is half the normal deductible limit. It also allows ``clawbacks'' of money already paid to executives at troubled companies and forbids so-called golden parachutes. . Most of the above mentioned is far better than the U.S going into a long deep recession and this might also stabilize financial markets in the short to medium term.
Remember The aim of the rescue is to unfreeze the credit markets -- short-term lending among banks and corporations. The core of the problem is bad real estate loans that have led to record foreclosures when the housing bubble burst and home prices declined.
Key provisions of the bill
Doling the money out: The $700 billion would be disbursed in stages, with $250 billion made available immediately for the Treasury's use. Authority to use the money would expire on December 31, 2009, unless Congress certifies a one-year extension.
Protecting taxpayers: The ultimate cost to the taxpayer is not expected to be near the amount the Treasury invests in the program. That's because the government would buy assets that have underlying value.
If the Treasury pays fair market value -- which investors have had a hard time determining -- taxpayers stand a chance to break even or even make a profit if those assets throw off income or appreciate in value by the time the government sells them. If it overpays for the assets, the government could be left with a net loss but would get something back on the open market for the assets when it eventually sells them.
If it ends up with a net loss, however, the bill says the president must propose legislation to recoup money from the financial industry if the rescue plan results in net losses to taxpayers five years after the plan is enacted.
In addition, Treasury would be allowed to take ownership stakes in participating companies.
Stemming foreclosures: The bill calls for the government, as an owner of a large number of mortgage securities, to exert influence on loan servicers to modify more troubled loans.
In cases where the government buys troubled mortgage loans directly from banks, it can adjust them more easily.
Limiting executive pay: Curbs would be placed on the compensation of executives at companies that sell mortgage assets to Treasury. Among them, companies that participate will not be able to deduct the salary they pay to executives above $500,000.
They also will not be allowed to write new contracts that allow for "golden parachutes" for their top five executives if they are fired or the company goes belly up. But the executives' current contracts, which may include golden parachutes, would still stand.
Overseeing the program: The bill would establish two oversight boards.
The Financial Stability Oversight Board would be charged with ensuring the policies implemented protect taxpayers and are in the economic interests of the United States. It will include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director, the Housing and Urban Development secretary and the Treasury secretary.
A congressional oversight panel would be charged with reviewing the state of financial markets, the regulatory system and the Treasury's use of its authority under the rescue plan. Sitting on the panel would be five outside experts appointed by House and Senate leaders.
Insuring against losses: Treasury must establish an insurance program -- with risk-based premiums paid by the industry -- to guarantee companies' troubled assets, including mortgage-backed securities, purchased before March 14, 2008.
The amount the Treasury would spend to cover losses minus company-paid premiums would come out of the $700 billion the Treasury is allowed to use for the rescue plan.
What this means to Centro via U.S malls are as follows:
1. Occupancy rates might still remain at acceptable levels
2. Encouraging for the consumer(consumer confidence) i.e. possible increase in short to medium term retail sales i.e leading up to december 15
3. Fear factor is minimized within the economy i.e. short to medium term.
4. People tending to spend more from now till december lead up to christmas i.e. stocking up with groceries , cakes, and other nice supermarket goodies.
5. A loss in value i.e. U.S malls minimized even more by the implementation and the execution of this rescue package.Yes agree we might still see valuation drops to a lesser extent.
Extra points.
6.U.S private placement noteholders supporting Centro and knowing that the only sensible solution is to extend and my guess is they will extend again come december (this time longer term) because they know centro have good quality assets as well as centro paying interest and relevant costs on a timely basis.
Why would they take a BiG loss knowing that in the meantime they have a steady income stream via Quality Long Term Tennants in the malls and also knowing they would receive "Peanuts" if they were to dispose of the assets at fire sale prices.Common Sense Thinking.
7. Knowing there are bigger issues the "World Markets Face" Centro's risk factor is probably reduced considerably.
8. If the lenders are happy with Centro's progress why do newspaper articles continue to speculate and make up stories based upon on their thoughts (remember this is only 1 writer with his or her opinion i.e. follow the herd mentality) and not what Centro lenders are saying?? some investors believe everything newspapers say.Lol DYOR
Anyhow in wrapping up im quite confident we'll get over the line but in saying this i hold (In total i.e Centro holdings) now 75% cer and 25% cnp as i buy more cer of late. In short term cer has better value but if centro fix up their issues which i believe they will i can probably see value in the long term for cnp holders.If cer fixes up super llc then there's more upside to cer holders.
No investment advice above or below.
People are asking why doesn't the share price hit $5 or $10>Value is not their yet, we are more likely to see centro retail trading higher in the short to medium term dure to lower debt levels compared to cnp ,a much higher N.T.A and a much simple business model.Their is alot more research to do on this but i won't personally go into it.
good luck and keep the faith
CNP Price at posting:
10.5¢ Sentiment: LT Buy Disclosure: Held
