'Bailing Out My Boys'
It's been over a month since the beginning of the bailout binge, and little, if anything has changed. For, the bailout, from its inception, has been little more than a bait and switch.
Driven by headlines of gloom and doom, spooked by the fear mongers of Wall Street, the White House and Congress rushed to send bales of bucks to banks -- many the very institutions that manufactured this mess.
Treasury Secretary Henry Paulson, formerly a top exec at Golman-Sachs, made barely intelligible sounds about "liquidity", and shoveled the dough to his old pals, while promising politicians that these funds would unfreeze loans so that business and consumers could access credit.
That hasn't exactly happened that way, has it?
Now, we see shifts in strategy, or new ways to throw away public monies for private interests.
Recently, a New York Times reporter overheard a discussion between an employee and an executive for J.P. Morgan Chase bank less than a week after it received $25 billion dollars of the $700 billion dollar bailout. The employee asked one of the bank directors how the loan affected their lending policies. The response was stunning:
What we do think it will help us do is perhaps a little 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 backdrop. We
should think that loan volume will continue to go down as
we continue to tighten credit to fully reflect the high cost of
pricing on the loan side."*
And we wonder why the bailout is a bust!
It was never designed to 'save the economy!' It was designed to do exactly what it did -transfer vast amounts of money out of the Treasury and into the banks.
And the next administration will begin with next to nothing, and every promise made during the election will turn to dust.
[*Source: "How the banks use our money," The Spark, Nov. 3-17, 2008, p.3.]