The Chosen Ones. I flipped on the local news late last night and saw a local bank CEO announce they have received millions of money from the bail out even though they don't need it. Images and drawings trying to explain how giving taxpayer money to some of the most consumer unfriendly banks would help the taxpayer abounded from the
infomercial newscast. Arrows and redirects flooded a white board where one could have written corporate public relations B.S. clip in it's place. Paulson is helping the worse bank in Oregon, notorious for old growth timber clear cutting. The CEO said he would probably use the money for acquisitions, consolidation.
The peddled to the American people claim was these banks get more money to make more loans, yet the reality is no one is addressing a now 1% Fed Rate yet credit cards still charge 20% interest and predatory loans abound. Even more interesting, it appears mergers and acquisitions are more what banks are doing with the money.
So why is Paulson picking banks that do not need the money and handing them our taxpayer funds? Is the Treasury now in the institutional investor business? How exactly is this pick and choose, which is leading to even larger too big to fail institutions?
The U.S. government's $160 billion handout to banks from Niagara Falls to Beverly Hills is going mostly to lenders that need it least, putting weaker rivals at risk of being shut down or taken over, analysts say
The reason these banks who do not need the money are taking the deal?
Some lenders say the deal was too good to refuse. The preferred shares that banks are selling to the U.S. Treasury yield 5 percent annually for the first five years before increasing to 9 percent.
``The program is so attractive that even though we have a fairly strong capital ratio, we just felt that it was an opportunity to get capital at a very attractive rate,'' said Roy Painter, chief financial officer at Saigon National, based in the Orange County, California, community of Westminster. ``We're a small organization, we expect to grow, and we'll need the additional capital down the road.''
Now, after shoving through a $850 billion dollar bail out and being Paulson's cheerleaders, Congress is now writing letters to Paulson about the bail out money being used for executive bonuses, mergers and acqusitions. A few others are now asking for investigations of steering funds for acquisitions. Gee wiz, if they are that upset about it, one would think they would not have crammed through carte blanche to Paulson in the first place.
Who's minding the store? Seems like no one.