Bailout Is a Windfall to Bankers, if Not to Borrowers

[FreeStateDemocrat]

Source: NY Times

By MIKE MCINTIRE
Published: January 17, 2009
At the Palm Beach Ritz-Carlton last November, John C. Hope III, the chairman of Whitney National Bank in New Orleans, stood before a ballroom full of Wall Street analysts and explained how his bank intended to use its $300 million in federal bailout money.
“Make more loans?” Mr. Hope said. “We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”

As the incoming Obama administration decides how to fix the economy, the troubles of the banking system have become particularly vexing.

Congress approved the $700 billion rescue plan with the idea that banks would help struggling borrowers and increase lending to stimulate the economy, and many lawmakers want to know how the first half of that money has been spent before approving the second half. But many banks that have received bailout money so far are reluctant to lend, worrying that if new loans go bad, they will be in worse shape if the economy deteriorates.


Read more: http://www.nytimes.com/2009/01/18/business/18bank.html?hp

---

Good thing BO will fix this just as soon as he's done putting lipstick on all the flying pigs. 2009 will be business as usual with the rich getting richer and the working class taken for a train ride. The political theater will be better produced but corporate American will still call ALL the shots.

[KansDem]

1. Give the remaining $350 billion to the American people!

$350,000,000,000 / 300,000,000 (Americans) = $1,166.67

An even larger amount if divided among taxpayers only.

Enough of giving $$$ to billionaires just because they fucked up...

[scotto2008]

3. I'm ready -- where's my bailout!

"Where's My Bailout?"
http://www.youtube.com/watch?v=kIjbMRU1EgU

[naaman fletcher]

6. yes..

There was no need for a bailout. Sure, you don't want the banking system to collapse, but the government could have overseen orderly bankruptcies of the idiots who caused the mess, and then we'd be back in business. All they have done is, in essence, force the taxpayers to make up the losses that these jackasses created. This is the greatest theft of the century, or all time probably.

[Blue_Tires]

9. +1

[high density]

10. Tax cuts are part of the Obama $825b plan

http://www.usatoday.com/money/economy/2009-01-15-obama-stimulus-plan_N.htm

•A payroll tax credit of $500 a person, or $1,000 for married couples. By targeting payroll taxes, the credit would benefit low-income working families who have payroll taxes withheld from their paychecks but don't earn enough to pay income taxes, says Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants.

•A $2,500 tax credit for the first four years of higher education. This credit would replace the current lineup of education tax credits and deductions, such as the Hope and Lifetime Learning Credits.

•A $7,500 first-time home buyer's credit. Last year, Congress approved a $7,500 credit for first-time home buyers, but there's a catch: The money has to be repaid in equal installments over 15 years, starting in the second year after the home is purchased.

The stimulus bill would eliminate the repayment requirement, but the home would have to be purchased by July 1.

[bkkyosemite]

16. This stimulus will not help me at all and millions of others who

are on fixed incomes. And my son just off workman's comp from a neck injury. Obama is leaving many out of the equation who desparately need a stimulus payment. There was an analogy that the seniors don't need a stimulus because after all they have medicare and investments and assets. Many many do not have any of those things and live very limited with prices going up and fixed income going down. Most of my fixed income goes to insurance premiums.

[JDPriestly]

32. This does nothing for retirees whose savings have been depleted

by the crisis and who suffer in silence. (Many of them don't yet realize what has happened to their life savings.)

[undeterred]

41. Why do I see so many retirees working for minimum wage

at the grocery store and fast food chains? (Rhetorical question.)

[bkkyosemite]

57. Because if they can get a job which my husband is trying and cannot 74 yrs old they need to work

to eat.

[closeupready]

17. $500 doesn't even pay half the mortgage for one month. Lot of good that will do us.

n/t

[debbierlus]

19. It will do no good at all. It is pathetic we aren't out in the streets

[debbierlus]

20. tax cuts don't do much good when you don't have a job or living wage

And, it certainly doesn't begin to cover a decent health plan

Weak & pathetic.

[Fire1]

40. Totally agree!

[JDPriestly]

31. $2,500 credit for four years of higher education is a joke.

Here are the costs for the U. of Alabama. I chose that school because I think it is probably less expensive than some others.

Cost of Attendance In-state: $16,984
Out-of-state: $28,684
Tuition and Fees
In-state $6,300
Out-of-state $18,000
Room and Board $6,430
Books and Supplies $1,000
Other Expenses $3,254
Payment Plans Credit card, installment plan, deferred payment

Invest in a building for your business and you get lower taxes. Invest in your education and you get a lollipop.

[fed_up_mother]

44. Is that supposed to be $2,500 PER year for four years?

And do you have to pay tax to get the credit?

[PatrynXX]

26. get rid of overdraft fees on payday

thats where that 350 billion should be spent. Used to be one could write a check the day before, but alas even with direct deposit, if that check is out there, it's going in first just a few minutes before the paycheck

:argh:

[bottomtheweaver]

2. Who could have seen THAT one coming?

:wow:

[Hannah Bell]

4. so if they don't lend it, what are they doing with it, putting it in a safe

deposit box until they have to pay it back - with interest?

the story doesn't make sense.

[Baby Snooks]

7. What are they doing with it?

They're cooking the books with it - covering as much debt to remain "solvent" a little longer. After they distribute the bonuses of course. We are headed for bad, bad times. No one seems to understand that. They seem to think Barack Obama has a magic wand. He doesn't.

[SlowDownFast]

33. Exactly right. 'Nuff said. n/t

[hay rick]

8. What they're doing with the money.

From the article: "Mark Fitzgibbon, research director at Sandler O’Neill & Partners, which sponsored the Palm Beach conference, said banks seemed to be allocating the bailout money for four general purposes: increased lending, absorbing losses, bolstering capital and “opportunistic acquisitions.”

The usual criticism of the TARP is that the money was offered as "capital injections" without meaningful stipulations on how the money would be used. The ASSUMPTION made was that shoring up balance sheets would lead to increased lending.

A few points:
1. A balance sheet is a moving target. In a deleveraging environment, assets may continue to depreciate. In this case, access to new capital is offset by expanding losses.

2. In a recession, the economy contracts. It is unreasonable to suppose that lending will be increased at a time when most businesses are cutting costs and production.

3. It is likewise unreasonable to expect bankers to stop acting like bankers and businessmen. If the primary purpose of the "bailout" was to ease the credit crunch- more strings should have been attached to the money.

4. Absent TARP, things could have been much worse. Or not. The true impact may be unknowable.

[kristopher]

27. Shame on you

For confusing people with reality based information. It is becoming clear that the real reason so many on DU hated the Bush years was envy at the proficiency with which the Bushies could create their alternate realities. The victimhood reality is the dominant theme so let's see you get with it in the future.

:eyes:

[hay rick]

47. my bad

[SlowDownFast]

34. Bullshit. TARP extended and deepened the pain.

If financial entities were forced to transparency and forced to take their licks, this crisis would still hurt but not as long and not as deep.

The gov't has effectively allowed the (continued) looting of our Treasury. Gov't intervention is making debt slaves of us all and generations to come. By the time this is over we will be SEVERAL trillion dollars in debt.

If any "bailout" should have occurred, taxpayers should of got that money.

[hay rick]

48. Or not.

We agree to disagree. I am skeptical about the implementation of TARP but disagree with those who think that allowing the financial dominoes to fall where they may is or would have been a better alternative.

On debt. We were $10 trillion in debt before the bailouts were initiated. Credit is a resource that can be used wisely (financing WWII), foolishly (financing Viet Nam and Iraq), and I'm-not-sure-which (financing Afghanistan). I'm keeping TARP in the latter category for now. Remember, Obama is about to get his crack at the second half of the TARP funds...

[NashVegas]

13. Buying Up Other Businesses

ie, more consolidation so we can have another big fat headache down the line.

[truedelphi]

23. Banks are buying up other banks

And in short order they will buy up other profitable items, like local water utilities and energy utilities.

It's a mess, and Kucinich and Issa tried to shame Paulson and Kashkari. Yet Obama put Geithner, Rubin and Summers on his economic team - the same people that should dbe hanging from lampposts are gonna advise the President and steer our economic ship of state even further into the maelstrom.

Meanwhile, the average American prides themselves on not understanding economic matters.

[bluesmail]

55. Jeremy Scahill and Naomi Klein say they're gonna use it

to topple governments that are resource rich. :shrug: I heard them say that back in Nov (?) at a Book Fair in Florida. (on TV that is).

[sutz12]

5. We lost our DUZY's. Could we start a D'UH award for stuff like this?

We gave a bunch of bankers a shitload of money with no strings attached and now we can't find it.

Who could have foreseen that?

:sarcasm:

[SammyWinstonJack]

36. THANK GOD IT PASSED!

x(

[ryanmuegge]

11. Just as it was designed to be.

I figured that this would turn out to be taxpayer-subsidized compensation insurance for executives.

[.... callchet ....]

12. Making loans as opposed to executive pay. Pay it back ?

How about they don't care if they pay it back. They have prepared for the worst by stockpiling spam, oops that was me, they are stockpiling money through bonus's and pay increases and expense accounts. If the bank fails, it doesn't have to pay anything back. The officers of the bank don't guarantee the debt of the bank. They just line their pockets and say good-bye.

[Mnemosyne]

14. Seems as if they are lending it to themselves and "friends". n/t

[bvar22]

15. Woo Hoo !!!

It's just soooo much better when it's The Democrats who are enriching the already rich at the expense of Working Americans and the Poor.

That's Reaching Across the aisle in a spirit of "Post-Partisanship"!

Lets have a PARADE, cause Our Team WON!!! :party:


NOW we have Your Children’s Money too !!!
And there is not a fucking thing you can do about it!
Now THIS is “Post-Partisanship” !
Better get used to it!!
Hahahahahahahahaha!


When is the last time a Working Class American gave YOU a "Fact Finding, Expenses Paid, 1st Class, 5-Star" trip to an exotic country?
.
.
.
Never?
.
.
.
.
Well then shut up. Get Over It, and STOP your whining, because I know where my bread gets buttered.

[debbierlus]

18. I knew where Barack stood when he supported this travesty during the election season

It isn't even hidden.

It is obvious. Barack is not who people will be celebrating on Tuesday. Not impressed at all.

[closeupready]

21. If the dictionary defines 'change' as 'status quo lite', he's our man.

n/t

[depakid]

24. I knew where he stood, too- right alongside leaders in every other western nation

like Gordon Brown & Chancellor of the Exchequer Alistair Darling of the UK -like Kevin Rudd & Treasurer Wayne Swann of Australia -and with eminent economists like Paul Krugman and James Galbraith.

To name but a few.

Who he didn't stand with- Republican ideologues and their acerbic, often vacuous counterparts on the other side- both of whom were prepared to cut off everyones' noses to spite their faces- bodes us all well.

[JackRiddler]

52. Fuck Gordon Brown, Fuck Kevin Rudd...

stop misrepresenting Paul Krugman and fuck your name-dropping as though it means anything.

With all due respect, of course. ;)

And fuck the whole caste of economists and their unstinting (if sometimes unconscious) ideological service to the banking class.

And fuck the Bank of Sweden and its bogus Nobel.

Are we clear yet?

Where do you stand? Where is your bread buttered?

[depakid]

59. Fuck people who want to cripple the global financial system

and hurt or bankrupt tons of otherwise healthy and ethical companies- impoverishing tens of millions of Americans (and hundreds of millions aborad) in order to quell their resentments and stick it to a few "fat cats."

People like that are as batshit crazy and blinded by anger (or ideology) as the Republicans- and (their counterparts abroad) who got us all into this mess in the first place.

Thankfully, the Obama administration seems to understand that- and looks to be focusing on both practcal solutions to the current dilemma and regulatory scemes that ensure these sorts of abuses won't happen in the future.

Meanwhile, you can keep venting along with the "burn baby, burn" crowd if it makes you feel better.

[JackRiddler]

60. Yes, you're describing the people who perpetuate the system that has burned

and will continue to inevitably burn the world, until it is abandoned.

This system offers nothing but further destruction and the time to minimize the damage by dethroning the bankers is always now.

Any bank lined up for this money should be nationalized on the spot. Which is going to happen anyway because of the inherent insustainability of the gangster-gambler system. But you would prefer to see a few million or tens of millions more be driven into bankruptcy and possibly starvation first, because of your ideology of "burn the poor, burn the middle class, burn the planet" to save the precious bankers.

Credit-default swaps must be declared null and void (charges to date are to be refunded). Only locally based credit unions should be left at all.

Take back the trillions given to these criminals and use those to start a new federal bank that lends capital for the production of wind turbines and solar farms. Subsidize organic farmers and mass transit and to hell with the banks -- prosecute the thieves.

PS - Where do you stand? Where is your bread buttered?

[depakid]

61. One place my (and likely your) bread isn't buttered is with presumptuous, name callers

who have neither a pracical working knowledge of economics- nor the motivation or ability to analyze workable solutions that benefit us all both in the states and abroad.

Not that I'm criticizing the ultimate goals you express- or your utopia per se. Just that you don't seem to have any appreciation about how to get there.

[JackRiddler]

62. Aw, did you get called a name? Doesn't hurt me when you do it.

Why don't you just admit your profession or job lives off propagation of the present faith in "market economics"? Come on, it's obvious enough. That's you and 20, 30 million other people, no big deal.

So, it's "utopia" to invalidate CDSs? This is exactly what's going to happen, either by decree or through insolvency. And nationalization is also coming, for the same reason: the banking sector rendered itself insolvent by placing bets greater than the value of all the collateral in the world.

Utopia is believing the TARP propaganda (whether it came from Paulsen or Obama), or thinking it was anything other than an attempt to swallow another chunk of that world before the admission of insolvency.

I'll try to be nicer to you. Just speak for yourself -- don't borrow Gordon Brown's non-existent cred.

[depakid]

63. Doesn't bother me- though it makes people look like juveniles

as does shouting about- or making vacant assumptions about other posters occupations.

(most all of which btw, are dependent in one form or another on a health, well regulated financial system).

Where do you think financing for alternative energy, organic farming and other green industries comes from?

:think:

Hint: Governments can't finance all of it by themselves.

And in case you're wondering- I've been doing policy analysis and advocacy in one form or another (including work for various NGO's) since the days of Garn St. Germaine -which many of us at the time warned against too- for many of the same reasons we did with the Gramm-Leach-Bliley Act (repealing Glass-Steagall) -to name but a few.

Unfortunately, the damage has been done- and (aside from pressing for legal accountability) venting about the corrupt and inept institutions and individuals or whinging conspiritorially about Obama, Gordon Brown or Kevin Rudd isn't going contribute to the solutions or persuade many people.

Nor is calling for impractical policies like mass nationalization- or the cancelation of all CDS's (without regard for the myriad consequences).

[JackRiddler]

64. Excellent question!

"Where do you think financing for alternative energy, organic farming and other green industries comes from?"

Easy: From almost nowhere!

These things barely get financed. One reason is that they certainly don't get subsidized, as they should, whereas competing sectors do get subsidized because they're more profitable in the short term and their industries thus influence the government accordingly.

After many decades of massive subsidies for oil and automotive culture (direct and indirect), and now that a few of the disasters that were already predictable as a result of these insane policies in the 1970s have become manifest enough to no longer deny, a belated and inadequate trickle is finally starting to flow to the green sectors. (So far, more has probably been spent on greenwashing PR than on actual R&D.)

Meanwhile, the largest solar industry in the world is in Germany - surreal! And it's not because of the German banking sector, which is as irresponsible and destructive as any other, despite better regulation. It's because of that country's taxpayer-financed policy of intelligent industrial subsidies, which the bankers end up following later. (Meanwhile, in this country, we instead have socialism for the war industry.)

Bankers never initiate anything worthwhile. They just jump on technologies developed in the public sector, once these become profitable.

So thanks for the question. It illustrates the stupidity and insanity of real-existing capitalism as well as anything else.

And unless you've got a way to add a few extra planets' worth of real estate and other assets, mass default on the derivatives universe and financial sector insolvency are already underway; nationalization will necessarily follow. By the end of this year you may be pretending you always saw it coming yourself.

[KamaAina]

22. Well, they haven't changed their credit policies for the last three years,

so why should they start now? :sarcasm: :sarcasm: :sarcasm:

The Whitney is the largest local bank remaining in NOLA, Hibernia having been hoovered up by CapitalOne right before the Federal Flood (because they had branches in Houston, and CapitalOne wanted into the Texas market). It is the bank of the moneyed, white people Uptown, like the one who was all put out in early Sept. '05 because he couldn't get any ice cubes for his highballs. :grr:

I'd be extremely interested to know if Liberty Bank is receiving any bailout money. Liberty is (or was) the country's largest African American-owned bank. It basically built the hard-hit neighborhoods of New Orleans East. For a time, its head, Alton McDonald, was commuting to its east New Orleans offices from Baton Rouge, 75 miles away. I could actually see Liberty using its share of the bailout to make loans in African American neighborhoods that are still struggling to rebuild. :eyes:

Did somebody say Palm Beach Ritz-Carlton? Was the ironically named Mr. Hope just there for some conference, or is he the sort of person who might have consorted with one Mr. Bernard Madoff? That'd serve him right -- but it'd be yet another blow to NOLA (sigh)...

edit: spelling

[Number_Six]

25. The Marie Antoinette award....

This asswipe deserves my personal Marie Antoinette award for demonstrating a wonderful, typical "fuck you!" towards the American public.

"We don't have to care, you're all shits who owe us money, so?" is what I read of snarky shit like this.

I say we don't bail out any more banks, period. Let them deal with it the old-fashioned way: On their own.

[Lagomorph]

28. The days of relaxed borrowing standards are over...

Maybe it's just my business degree clouding my judgement, but I doubt a banker would dare to make anything but a well-secured loan these days, at the risk of being thrown in prison or simply beheaded in his office.

They're gonna have to come up with a way to provide loans to low-income people that doesn't put the risk on the public.

This bailout is being done with printing press money that is nothing more than IOU's assigned to people who haven't even been born yet.

[killbotfactory]

29. We were robbed

But at least they did something! :sarcasm:

[JCMach1]

30. Plus add 3.5 trillion with the increased savings rate (now 3%)

and the banks will be soiling themselves with cash by the end of the year.

I expect them to use that flood of cash in the shark tank of mergers... i.e. nothing productive for the economy.

[No Elephants]

35. Rumsfeld panicked everyone thinking they had to act in 5 minutes on Iraq or all would be lost and

Congress jumped. Paulson panicked everyone into thinking they had to act in 5 minutes on the bailout or all would be lost and Congress jumped. In both cases, the power lay in the Congress, and only the Congress, whether the power to declare war or the power of the purse. call and email them.

[Vinca]

37. Maybe some is getting down to the masses.

Our local small bank suddenly has $12 million available for mortgages.

[fasttense]

38. "Thank you for your children's and grand children's money," said the banks.

The money bailed out the bank executives and CEO's, nothing more. Our tax dollars and now our children's money, went to keeping the uber wealthy bankers in the lifestyle they have become accustomed to.

While the CEO's - "mingled with investment analysts at an ocean-front luxury hotel, where the agenda featured evening cocktails by the pool and a golf outing at a nearby country club."

And your kid's struggle to feed themselves.

The bank executives will survive off our blood.

“We see TARP as an insurance policy,” he said. “That when all this stuff is finally over, no matter how bad it gets, we’re going to be one of the remaining banks.”

[natrat]

39. fuck you chris dodd you piece of criminal shit

Dodd Will Not Mirror Frank's Bailout Bill
by: Chris Bowers
Fri Jan 16, 2009 at 13:56


"I just received confirmation from a congressional aide that Senate Banking Chair Chris Dodd will not introduce legislation in the Senate to mirror House Finance Chair Barney Frank's bill, HR 384, to provide increased conditions, transparency and oversight on the second $350 billion of the Wall Street bailout money (otherwise known as TARP).

As such, the funds will be released without any further conditions attached to them. Given that incoming Treasury Secretary Timothy Geithner has been closely involved with the disbursement TARP funds so far, virtually nothing will change about the program whatsoever. We still won't know which firms are receiving the money. We still won't know how that money is being spent.

All that was necessary to secure a seamless transition from the Bush bailout to the Obama bailout were two letters sent from Larry Summers to members of Congress. This is the same Larry Summers who, just last week, drafted a massive business tax cut for the stimulus package, which even moderate Democratic Senators found abhorrent. That tax cut was removed from the stimulus because, unlike anything that happens with TARP, one chamber of Congress can shoot it down with a simple majority vote. By comparison, for TARP to be stopped, a two-thirds majority was required from both branches of Congress.

Dodd's willingness to just trust the administration is, as Elena Schor noted earlier in the week, similar to the trust many Senate Democrats placed in the Bush administration when granting them authority to use military force in Iraq. Keep in mind that Dodd was one of the Democratic Senators who gave that authority to the Bush administration. While it can be safely said that there are good reasons to trust the Obama administration more than the Bush administration, HOPE and trust were abandoned as systems of government a long time ago. A far greater level of assurance than a letter to Congress would have been President Obama signing a Senate-approved version of HR 384 into law. It is a willingness to sign such laws, beyond HOPE, that was the reason so many Americans voted for Obama back in November. Letters of assurance are no substitute for actual laws.

TARP money will be released, without any new conditions, oversight or transparency attached to it. At this point HOPE has moved from a campaign slogan to a system of governance."


http://openleft.com/frontPage.do?nextId=1

[SlowDownFast]

42. Fred Flintstone could have done better. "Barney" Frank can go to hell, too. n/t

[JackRiddler]

54. "Given that incoming Treasury Secretary Timothy Geithner has been closely involved...

with the disbursement of TARP funds so far..."

it's always the same class war clusterfuck. That's what's given.

[Joanne98]

43. K&R

[fed_up_mother]

45. Working class isn't taking a train ride. They're being thrown under the train. :(

[D-Lee]

46. The Bushies obviously did a great job on TARP contracts (sarcasm)

I'm not sure I'd blame Congress ...

I suspect that the Bush TARP grant contracts waived every protective provision included in the TARP legislation. Can't find the link, but banks were given an automatic waiver on the legislative provision which required the administration to put limits on outsourcing jobs to outside the US when they took TARP funds.

A lot like the Bush "signing statements" -- de-gut Congressional limits.

More sarcasm: another shining example of lawlessness by the right-wing "law and order" crowd!

[tbyg52]

49. It's the corporations, stupid!

I keep trying to get that meme taken up.... ;)

[SOS]

50. George Bush, Goldman Sachs CEO Paulson and a bribed Congress

set up a "bailout" that shafts the American people while fattening the balance sheets of corrupt banks?
Shocking!
Never saw that coming.

[mapatriot]

51. Nationalize

I was a commercial banker (very senior level) for twelve years. I have been a manager for a large international securities firm for fifteen years. I am an unrepentent capitalist. I know the financial services industry from the inside out. The ONLY way to solve this crisis is to nationalize the nations largest banks and to sell off the assets piecemeal. Same with Smith Barney, Merrill Lynch, UBS, Morgan Stanley and Wachovia.

Executive management has betrayed the shareholders, the employees and the nation. Most of my retirement is in the stock of one of these companies, but I still say it is the shareholders that must suffer and lose our investment. We elected the directors who oversaw the management and we must take that responsibility. But it can't stop there. Directors and any executive officers (along with immediate past executive officers and directors) need to be aggressively prosecuted. They should lose their pensions and any wealth acquired from their service over the last five years. Those assets should go into the treasury of the United States.....the people who have most been betrayed by their actions.

Some will say that would be overt socialism. Not at all. If someone walks into a convenience store and takes money from the cash register, they will not only go to prison but their ill gotten gains will be returned to the victim. Out of greed, these financial criminals have stolen from us all and they need to be punished and the ill gotten assets returned.

[closeupready]

53. Can Obama or Holder initaite such investigations?

??

[Robb]

56. You may not be new here

but you're new to me. Welcome to DU. :hi:

[christx33]

58. My wife and I

drive around running errands for the kids and we see bank branches go up EVERYWHERE. there are currently at least 5 within 2 miles of our apartment. My wife turned to me one day and said "I thought these banks were having troubles right now?" I said "Remember that bailout they are getting? This is what they are doing with it."
It makes me sick