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Linus Wilson

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  • The Rising List of Banks Failing the Stress Test [View article]
    The operating benefits come from better incentives not from the government exercising control rights. If the conversion only involved passive private investors, then managerial incentives would improve. The problem is individual private investors generally lose from swapping a senior security for a junior security. The government is probably the only creditor willing to absorb that loss by converting from preferred to common because it is de facto providing insurance against systematic risk.
    Apr 30 10:10 AM | 1 Like Like |Link to Comment
  • Goldman Sachs' TARP Went to Buffett [View article]

    Apr 27 02:49 PM | Likes Like |Link to Comment
  • Goldman's Issuance: Proof TARP Money Isn't Being Loaned Out [View article]
    I think the problem is that TARP had the banks issuing the wrong type of security. See
    Apr 26 08:14 PM | Likes Like |Link to Comment
  • Banks Exiting TARP Is Bad News for the Economy [View instapost]
    I think the big banks should have bigger capital requirements, but I think if they raise common equity that they be allowed out of TARP. See
    Apr 26 08:08 PM | Likes Like |Link to Comment
  • Goldman Sachs' TARP Went to Buffett [View article]
    How do you figure the number of TARP warrants for GS will be reduced?
    Apr 26 09:51 AM | 2 Likes Like |Link to Comment
  • Bank Stress Tests: Tangible Common Equity a Critical Metric [View article]
    This is a nice post. My research and says that the best way for banks to extend credit efficiently is to increase their common equity capital. It doesn't matter if they raise common equity through TARP or from private investors like GS did with its $5 billion seasoned equity offering.
    Apr 24 10:58 AM | 1 Like Like |Link to Comment
  • Taxpayers' TARP Warrants Are Worth Billions: Don't Give Them Away [View article]
    As an update, Clusterstock reports that GS is not one of the banks that thinks the warrants are worthless. See . A representative from GS says it is committed to pay fair market value for the warrants and they unlike some other banks have never lobbied congress to get out of paying for the warrants. This is response to an earlier story on Clusterstock .
    Apr 24 10:48 AM | Likes Like |Link to Comment
  • Bank Recaps: Why the Preferred Stock Swap Makes Sense [View article]
    A nice analysis. It is also consistent with my research findings. See
    Apr 20 02:28 PM | Likes Like |Link to Comment
  • TARP Funds to Common Stock: More Accounting Games [View article]
    I think Mr. Kwak is wrong. See
    Apr 20 11:40 AM | 1 Like Like |Link to Comment
  • The Treasury and White House reportedly conclude they can prop up banks without asking Congress for more money by converting gov't loans to the country's 19 biggest banks into common stock. If they do so, they'll face loud cries of back-door nationalization.  [View news story]
    As long as the government gets a decent conversion price that reflects the market value of their preferred holdings, converting preferred to common stock is a great idea that will improve lending incentives. My research shows that common stock improves lending incentives for troubled but solvent banks. Preferred stock is too much like debt to encourage banks to make good loans. The government could sell its common stock holdings quickly after the conversion (to diffuse any fears of government ownership) and lending incentives would improve. It doesn't matter who owns the common stock to see improved incentives. See my research at and
    Apr 20 09:09 AM | Likes Like |Link to Comment
  • AIG chief Edward Liddy still owns a significant stake in Goldman Sachs (GS), one of the key counterparties that was made whole by the government's bailout. Simon Johnson, not one to overreact, is seething.  [View news story]
    Liddy should step down at the very least.
    Apr 17 10:57 AM | 2 Likes Like |Link to Comment
  • Can Citigroup Be Restructured Without an FDIC Resolution? [View article]
    Most exchange offers fail. Bondholders who do not exchange their debt for equity, the holdouts, do better than the bondholders who give up their senior claim for equity. (See page 4.) Why do you believe that Citibank bondholders will cave when the administration has shown no stomach to take over troubled mega banks?
    Apr 17 10:51 AM | Likes Like |Link to Comment
  • Goldman's Hubris [View article]
    I think the GS seasoned equity offering was good news for U.S. taxpayers. See
    Apr 16 12:14 PM | 1 Like Like |Link to Comment
  • Will the Government Keep Goldman Under Its Thumb? [View article]
    I'm glad people are talking about the FDIC loan guarantees. I still think paying back the TARP preferred investment is a good idea since GS raised common stock. See
    Apr 16 09:28 AM | Likes Like |Link to Comment
  • Calling TARP funds "a scarlet letter," JPMorgan (JPM) CEO Jamie Dimon says on this morning's earnings call he's ready to repay the government's $25B tomorrow. Dimon had previously said he'd consider a TARP payback as soon as is prudent. JPM +2.6% premarket.  [View news story]
    Treasury should push JPM to raise new common stock if JPM wants to pay back TARP. See
    Apr 16 09:23 AM | 1 Like Like |Link to Comment