Capital Assistance Program

Money is given in exchange for preferred stock that pays a 9 percent dividend. The preferred stock is automatically converted into common stock at the end of seven years. The banks receiving funds will be restricted in paying dividends, buying back their stock, and buying other firms with cash.^[3] Because preferred stock is similar to debt in that it gets paid before common stock, some economists have questioned whether the buying of preferred stock by both the Capital Assistance Program and the Capital Purchase Program will be effective in getting banks to lend efficiently.^[4][5]