The deepening red ink underscores a crucial question about the government’s plan: Will lenders deploy their new-found capital quickly, as the Treasury hopes, and unlock the flow of credit through the economy? Or will they hoard the money to protect themselves?
John A. Thain, the chief executive of Merrill Lynch, said on Thursday that banks were unlikely to act swiftly. Executives at other banks privately expressed a similar view.
“We will have the opportunity to redeploy that,” Mr. Thain said of the new capital on a telephone call with analysts. “But at least for the next quarter, it’s just going to be a cushion."
Sounds comfortable, that cushion. Wish I had one. But-- but-- I thought the idea was that our trillion would be used to get the banks loaning out money again? So the credit freeze would thaw?
The government, however, has offered no written requirements about how or when the banks must use the money.
“There is no express statutory requirement that says you must make this amount of loans,” said John C. Dugan, the comptroller of the currency. “But the economics work so that it is in their interest to do so.”
The banks could use the money from the government for any number of things. Some analysts say the banks may use it to acquire weaker competitors. Others say they might use it to avoid painful cost-cutting. And still others say the banks may sit on the capital.
Mr. Dugan added that he would not examine how the banks used the money, but he said their actions would “be open to the court of public opinion.”
Wow, that'll scare 'em. And if that doesn't work out, maybe Congress will write a sternly worded letter!
NOTE So, when Obama know this was going to happen when he worked he phones for the Bush + Reid + Pelosi + Obama + Paulson bailout? Hard to imagine he didn't, what with his galaxy of star economic advisors, isn't it? But whether he did or he didn't, it doesn't look good either way. For anyone but Hank Paulson's golfing buddies, that is.
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Is the agreement that was signed binding?
It seems to me that the "agreement" that was signed by the nine bank presidents has to be considered legally non-binding unless/until those banks' boards vote on it -- and absent some kind of guarantees on how those billions would be spent, the Treasury should withdraw the offer.
He was willing to vote for a worse bill
Remember, the bill he voted for was the "better" one with the option for a stock injection plan. But he thought the earlier one that Pelosi tried to pass in the house was all hunky-dory and everyone would be toasting with champagne when it passed. It made NO provisions for the taxpayer to own anything. Well, due to the slightly less crappy senate bill, we now own the banks but as far as I can tell, we are silent partners. They have to pay us dividends first but they can do whatever they hell they want with the rest of the money and from what I've heard, they want to pay their shareholders.
Hillary was up against a wall. Her constituents were losing their jobs and breathing down her throat. You can't say she didn't try to put a number of options on the table before they voted. She held her nose and voted because she didn't have much choice. What's Obama's excuse?
BTW, we still have no idea who snuck the stock injection plan option into the final bill. Since neither of the candidates have taken credit, that leaves 98 other senators. I'd love to know which one did it and why it had to stop there.
Come together at The Confluence
Come together at The Confluence
$70 billion in pay and bonuses this year to
workers at the banks that are getting bailed out-- http://www.guardian.co.uk/business/2008/oct/17/executivesalaries-banking
Just like the stimulus check
Which mostly went to those with more money who put it into savings, the banks are not going to pump it out into the economy.
That money would have been better spent on working people, who would have paid bills, bought necessities, and otherwise pumped it into the economy.
Obviously those folks don't want to actually admit that giving money to the wealthy only leads to LESS money in the economy, not more.
"A little knowledge is a dangerous thing. So is a lot." - Albert Einstein