Saturday, October 25, 2008

Carpetbagging On The Public Dime

I just spotted this in The New York Times and decided it needed to be posted. It concerns the hundreds of billions of dollars the US government has chosen to inject into the nation's banks to improve their liquidity in order to get credit flowing again to American business.

Guess what? The banks are happy to take it but they have a different idea of what to do with their Washington windfall. One executive at one of the surviving megabanks was careless enough to let a Times reporter eavesdrop on an internal discussion:

"In point of fact, the dirty little secret of the banking industry is that it has no intention of using the money to make new loans. But this executive was the first insider who’s been indiscreet enough to say it within earshot of a journalist.

(He didn’t mean to, of course, but I obtained the call-in number and listened to a recording.)

“Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase,” he began. “What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns
mergers. 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 and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.”

So, to summarize, those hundreds of billions of dollars of wage-earning taxpayers' money the banks are getting to free up America's credit markets are to be used, instead, as a mergers and acquisition windfall.

That kids is fraud, plain and simple, old-fashioned fraud. And it's fraud on the very taxpayers whose own financial future already has been put in jeopardy by the greed of these same banksters.

I think it's time that Washington simply seized these banks and threw their scheming managers out on the street.

This is truly mind-boggling.


susansmith said...

You mean a very socialist idea of "nationalizing the banks"? How radical is that?
That is what happens when there are no strings attached (regulation), and it's based on that voluntary concept.

The Mound of Sound said...

Not quite as radical as Wall Street bankers pilfering bail out money for their own benefit. I know, instead of nationalizing the banks, why not put all those empty lamp posts to good use?

susansmith said...

Well, that was no surprise when $$ is given with no strings attached, no regulation enforcement, no contractual relationship.

Gordon Brown (labour party) in England was in a perfect position to nationalize banks there and the public would have been totally supportive. Why not?

We use to own the our national bank and our debt, and that is how we financed world war 2 and the recovery. What we borrowed, we paid back to ourselves in interest. Then Mulroney came to power and thought it would be a swell idea to give that over to private banks who than raised their interest rates, and made our public debt grow through compounded interest rates at 11/12%.
Oh and the bank of Canada in its neoliberal wisdom thought it swell to get inflation down to 1% and drop off the twin goal of employment. You might consider there were other alternate policy options and still are.

The Mound of Sound said...

Frankly, I was left wondering whether the NYT piece was some sort of hoax. And yet I couldn't see a context in which the paper would do that without suffering dire consequences. That leads me to conclude that it's true and, as you noted, this direct cash injection (exclusive of the trillion dollar bailouts) must have been given with handshake understandings, not proper regulation.

You've read the linked article, you know they named the bank and you know it's huge. That makes it even more egregious that an outfit that large, conscious of today's realities, could even think of appropriating the liquidity infusion and diverting it to other purposes. It's nothing short of mind-boggling, really.