Why the Bail Out Won't Work

The final Bail Out bill passed by congress last week includes a key provision that should prevent any significant participation from the Banks who needed it. Section 113 of the plan requires that the Treasury receive non-voting warrants from participating financial institutions. A warrant is a contract to receive a company's shares at a set price some time in the future. If significant warrants are outstanding on an institution, investors will avoid allocating capital to these organizations for fear their ownership will be diluted once the warrants are exercised. Why would we want the government to own these banks anyway, haven't we spent the last 30 years trying to denationalize our economy?