Monday, November 03, 2008

More bailout lament

Looks like the bailout czar Mr. Kashkari and the uber bailout czar Mr. Paulson have given very little thought on the way they have planned to use the 700 billion 'bailout' dollars allocated to them by the congress. Initially they told us that they would use the money to buy troubled assets from banks at market or below market prices. In fact the name of the bill was TARP – Troubled Asset Relief Program. Suddenly, that did not seem like a good idea and just as Europe (and England in particular) was planning on loaning money to banks directly in the hopes of thawing the credit freeze that was enveloping us, our bailout czars decided to follow the same path. The only difference with the approach they took here was that they decided to dole out the money on an arbitrary basis to banks of their choice with little pre-conditions attached. 'Friends of Hank' got about 125 billion from the largesse that was announced without fanfare a couple of weeks back. This week they also announced that they have started doling out the remaining 125 billion (of the 250 billion first tranche that they had powers over) to smaller banks of their choosing. Apparently what these banks have been doing with the money is pretty egregious.

From here: 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.

Buying and acquiring other banks with private money is capitalistically 'noble' - it increases shareholder wealth and all is fine with the money making machinery. It is frightening when the big banks openly tell us that they are planning to channel taxpayer money (ostensibly given to spur lending and ease the credit crunch) into private acquisitions and takeovers of other banks. This not only makes the public and the Congress look like jackasses, it also begins to smack of a socialist mindset - government giving large amounts of money to large oligarchic institutions in order that they go ahead and use public monies to gobble up smaller ones.

And Sen. John McCain accuses Sen. Obama of spreading the wealth!!

No comments: