The Reduction Clause: Straight from Dr. Suess Dilbert

HEADS I WIN HALF, TAILS I LOSE ALL

The taxpayers will take warrants (rights to buy up stock). These will end worthless, if the injected companies ... continue to get worse.

If the injected company does well and pays back the "injection" (by issuing common stock or another preferred), then the number of warrants gets cut in half.

So, the taxpayers participate in all of the downside they asked for, but only half of the upside they asked for.

Why not just ask for "half", upfront? I guess this is supposed to be the 'inducement' part of the deal?

THERE IS MORE

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There is more. (Can you believe it?).

The taxpayers can get up to 45% more for their warrants, for what looks like penalties to the 'injected managements', if they fail to get the consent of the UST on some issue.

That means, if the management ignores the Treasury, and the stock goes up, the taxpayers get paid for this thumbing of the nose at the Treasury.

If management is ignoring the Treasury, and the stock is going down, the taxpayers get more of something that is declining in value (perhaps on its way to zero, in the worst case).

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