Another type of Bailout: Now the mutually owned banks.

http://www.boston.com/business/ticker/2009/04/mutually_owned.html
We are not sure if this is going to come in play.
However, it seems very possible that now the mutually owned companies would be taking part in the Fed's bailout program.
One thing I understand about the difference in how 2 of the companies are structured is as follows.
1. Mutuals are owned by policy holders
2. Stock companies are owned by stock holders.

Therefore, stock company's capital would come from issuing debt, issuing stock and retained earnings.
Whereas mutual companies would issue debt and would not be able to issue stocks in order to raise capital.

I honestly do not understand how would mutual companies be troubled as much as the stock companies are.

The appetite for taking on the risks should be much higher in stock companies compared to mutuals. However, there are mutuals that failed.

The main concern I have is not what I discussed above.
As I may have pointed out my opinion about the Fed's bailout in the past blog, I would like to share my point of view on how the money would be spent so that it may be better off for many of us.

Below is my opinion.
I think we all know one thing in certain.
The economy has been in the downfall and we still do not see any improvement.
Fed's decided to implement the bailout plan in order to rescue the troubled institutions.
I think this may be the right thing to do. However, how much are they going to spend?

When there is a visible pothole on the road, there are 2 options in order to improve the existing condition.
1. Spend money immediately in order to repair the hole so that it saves most of us temporarily.
2. Use the money first on researching how the pothole was created.

To me, the first option seems like what the government is doing with the tax payers money.
This may be an okay approach. It would fix the hole and no one gets hurt until there is a crack on the part where it was fixed. We may see a crack on the road that was fixed tomorrow. Or, we may never see the crack for the next 10 years.

2nd option is to spend the money wisely. Performing a research on how the problem occured and how it can be prevented in the future.
In our class discussion today, Dr. Grace talked about the rating agencies are not taking responsibilities for the misleading information that they gave out.
This may be one things which can be improved.

There are many smart risk managers in our society at the corporate level.
Maybe the government can bring in some of those smart people in order to perform these types of tasks for them.