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The Genius of the Great $770 Billion Federal Bail-out...

The Congress voted to send hundreds of billions of dollars to bank to ease the credit crunch ... and neglected to include language that requires them to lend any of it out:

The infusion of federal money is to rebuild banks' battered capital reserves so the institutions would feel comfortable resuming more normal lending practices. But that confidence was undercut somewhat when reports surfaced that bankers might use the money to buy other banks. Indeed, the government approved PNC Financial Services Group Inc. to receive $7.7 billion in return for company stock on Friday and, at the same time, PNC said it was acquiring National City Corp. for $5.58 billion.

There is little federal officials can do about it. There is no language in the bailout bill that specifically obligates banks receiving money to increase their loans. Officials had argued that attaching strings to the capital-infusion program would discourage financial institutions from participating.


So while Barney Frank worries about CEO bonuses creating perverse incentives and insisting that there are more rich people out there to tax, it seems that he missed the fact that his plan was giving away billions of dollars without any strings attached.

Not that I want the Federal government to act any smarter when it's nationalizing large segments of the economy. Just pointing out that it can't even get it right when it tries.
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aka rc said…
I may be wrong but I'm thinking there is no language that limits the paying of dividends to shareholders. And who are the largest shareholders? Who has the options on less than market shares? And how is it that these banks can continue to fund campaigns?

And how is it that all these don't vote for so and so because he's a socialist and wants to redistribute the wealth (?) or don't vote for the other so and so because he will continue the Bush economic policies (?) float when both parties agreed to engage in a Corporate coalition
to engineer the largest theft in history?

And how do they justify it? They do not have to. Because not only will we do nothing other than whine, we will vote for more of the same, whoever wins.
October 30, 2008 at 10:26 PM
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