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[bacasper]

We were told that the $750+ billion bailout package had to be passed immediately in order to restore liquidity to the markets so that businesses could to meet their daily obligations. Well, guess what? The bankers have taken this windfall handout and used it not to lend businessmen but rather to buy up failing banks at pennies on the dollar or healthier banks. Either way their bottom line is increased. Should taxpayers have paid to increase bankers' profit margins?

Editorial

Loans? Did We Say We�d Do Loans?

Published: October 28, 2008

According to Treasury Secretary Henry Paulson, the chief proponent of the big bank bailout, flooding the banks with taxpayers� money was supposed to get them to start lending freely again. And that, in turn, was supposed to stabilize the markets and prevent the downturn from being worse than it otherwise would be.

It was not entirely clear from the start exactly how Mr. Paulson would ensure that things would go that way. Indeed, earlier this month, shortly after the bailout was enacted, The Times�s Mark Landler reported that Treasury officials also wanted to steer the bailout billions to banks that would use the money to buy up other banks.

Now, lo and behold, with $250 billion in bailout funds committed to dozens of large and regional banks, it turns out that many of the recipients of this investment from taxpayers are not all that interested in making loans. And it appears that Mr. Paulson is not so bothered by their reluctance.

Mr. Paulson and the bailout recipients have some explaining to do. Congress should plan hearings as soon as possible � and take action to set a clear strategy.

In his column on Saturday, The Times�s Joe Nocera told about a conference call that he had listened in on recently between employees and executives of JPMorgan Chase. Asked how an infusion of $25 billion of bailout funds would change the bank�s lending policy, an executive said the money would be used to buy other banks.

�I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way,� the executive said. He added that the money could also be used as a backstop in case �recession turns into depression or what happens in the future.�

There was not a word about lending � not to businesses or home buyers or car buyers or students or other consumers. Just the opposite. In response to another question, the executive said that the bank expected to continue to tighten credit.

JPMorgan Chase is not alone. The Wall Street Journal reported on Tuesday that some regional-bank recipients of the bailout money had acknowledged that only a small portion would be used for loans and the rest for acquisitions and other purposes.

It is prudent for government officials to encourage healthy banks to acquire weak banks. Doing so prevents bank failures and avoids the taxpayer costs and economic disruption that accompany such collapses.

The problem is that the Treasury has refused to put conditions on the banks� use of the bailout funds, allowing them, in effect, to make purchases of banks that are not on the verge of failure. That could help to maximize the banks� profits � a worthy goal when the capital they are using is from private investors.

However, when they�re using taxpayer-provided capital, as they are now, Congress and the public have every right to require that the money be used to benefit the public directly, even if doing so crimps the banks� profits. If Treasury won�t impose conditions, Congress must, including a requirement that banks accepting bailout money increase their loans to creditworthy borrowers and limit their acquisitions to failing banks, such as those listed as troubled by the Federal Deposit Insurance Corporation. The bailout should not be an occasion for banks to make a killing.

An even bigger problem is that the bailout was sold as a way to spur loans. If that never was � or no longer is � the primary aim, Congress and the public need to know that. Lawmakers should not release the second installment � $350 billion � until they have answers and guarantees that the bailout money will be spent in ways that put the public interest first.

[ontheway]

Bailout Price Tag: $3.5T So Far, But 'Real' Cost May Be Much Higher

Posted Nov 12, 2008 10:16am EST by Aaron Task in Newsmakers, Recession, Banking


While the government is clearly spending a lot of taxpayers' money to bail out financial firms, the tally is even bigger than most Americans (economists and pundits included) are probably aware or willing to admit.

The bailout bonanza has gotten so big and happened so fast it's the true cost often gets lost in the discussion. Maybe Hank Paulson and Ben Bernanke prefer it that way because the tally so far is nearly $3.5 trillion, and that's before a likely handout for the auto industry.

Yes, $3.45 trillion has already been spent, as Bailoutsleuth.com details:

$2T Emergency Fed Loans (the ones the Fed won't discuss, as detailed here)
$700B TARP (designed to buy bad debt, the fund is rapidly transforming as we'll discuss in an upcoming segment)
$300B Hope Now (the government's year-old attempt at mortgage workouts)
$200B Fannie/Freddie
$140B Tax Breaks for Banks (WaPo has the details)
$110B: AIG (with it's new deal this week, the big insurer got $40B of TARP money, plus $110B in other relief)

Tallying up the "true" cost of the bailout is difficult, and won't be known for months if not years. But considering $3.5 trillion is about 25% of the U.S. economy ($13.8 trillion in 2007) and the U.S. deficit may hit $1 trillion in fiscal 2009, hyperinflation and/or sharply higher interest rates seem likely outcomes down the road.

At the very least, the possibility of the U.S. losing its vaunted Aaa credit rating -- which determines the Treasury's borrowing costs -- cannot be discounted.

Moody's has already said it's not in jeopardy of being lowered. But we really can't put much stock in what Moody's -- or S&P or Fitch -- say after the subprime debacle, can we? More importantly, the price of credit default swaps on U.S. government debt has been on the rise since the bailout train got rolling, as Barron's reports.


http://finance.yahoo.com/tech-ticker/article/126117/Cost-of-the-Bailout-3.5T-So-Far-But-%27Real%27-Cost-May-Be-Much-Higher?tickers=AIG,FNM,FRE,XLF,^DJI,^GSPC,C

[sojourner1]

It doesn't appear to be helping the majority of Americans to bail out the bankers and executives. They're just going to squeeze whatever capital gains they can get out of the use of this money and then line their pockets while main street goes down the tube. Your average knucklehead has many ridiculous challenges ahead in order to keep a roof over his/her head and a way to sustain. I say we should had just let em' fall so the markets and economy can correct as to allow new growth. It's better to do it sooner than later as the pain and hardships will only get worse.

I have a hunch industries associated with high luxury and tourism won't die since executives can afford these various services, but much of main street will become fossilized ruins.

[VanIslander]

giving money with no strings attached?
no conditions to be met?
no program just a hand out?

*beep* crooks