We are all venture capitalists now

The key to any bailout is not relief for homeowners or restrictions on CEO pay; the key thing is that we get significant equity stakes in any publicly-held company that is a direct beneficiary of the bailout.

Consider this -- the only way the bailout actually accomplishes its goal of beefing up the reserves of major financial institutions (they need reserves so they can actually make loans and extend credit, and thereby help to fund the economic recovery), is if Uncle Sam pays more than the fair value of the mortgage-backed securities and related "troubled assets." If we pay fair value, there is no increase in reserves - it is essential that we pay too much.

The excess value that taxpayers are being asked to pony up will be hundreds of billions of dollars - enough to threaten universal health care, social security, medicare and medicaid, and middle class tax relief. It is a gift to shareholders and management of firms like Goldman Sachs, and a significant sacrifice for working class Americans.

The wealthiest Americans - people like Henry Paulson - will see significant benefits under this plan, while many of us can expect to see our social safety nets cut once again.

That excess payment - the amount above the fair value of these assets - needs to be translated at current share prices into shares of common stock and transferred to Uncle Sam as part of the deal. No token equity grants -- this has to be proportional, based on the ratio of bailout funds to the market value of the entity. When we ultimately liquidate our positions in these assets, our losses should be offset by the value of our shares in Goldman Sachs, Bank of America, AIG and other beneficiaries of the deal.

Secretary Paulson, formerly the head of Goldman Sachs, opposes the idea of taking equity in return for the bailout, but any deal without such a provision should simply be rejected by Congress. We are all venture capitalists now, and we need to get paid like venture capitalists.

We should make sure we get ours in this deal, and that means substantial equity stakes.

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