Investors are dumping bank stocks "because they don't know what the next government solution is going to be, and there's a fear that whatever it is, it's going to ultimately be dilutive to shareholders."Isn't government intervention supposed to calm markets?
Wednesday, January 21, 2009
Irony: government creates more uncertainty.
The threat that the government will take ownership of banks is creating uncertainty about the future of bank stocks:
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Calm is relative. The only reason the shares are worth anything is because of the possibility that the government will intervene in a way that preserves the value of the equity (versus, say, nationalization).
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