Yup, that's right, scam, I used the word. Now mind you, this is a paltry amount of the $700B that was shoved down tax payers throats, but read on and I think we'll see what has set me off to no end.
Here I was happily meandering DKos and HuffPo before I start supper when down the page a ways on HuffPo, I ran across this little gem:
Banks Have No Intention Of Using Bailout Money To Make New Loans
More below the fold...
So I start reading this not so lovely piece of news, and I can feel my blood pressure rising. Let's start where I go a bit ballistic:
"Chase recently received $25 billion in federal funding. What effect will that have on the business side and will it change our strategic lending policy?"
It was Oct. 17, just four days after JPMorgan Chase’s chief executive, Jamie Dimon, agreed to take a $25 billion capital injection courtesy of the United States government, when a JPMorgan employee asked that question. It came toward the end of an employee-only conference call that had been largely devoted to meshing certain divisions of JPMorgan with its new acquisition, Washington Mutual.
Now, at first, that $25B doesn't seem so bad, really when one thinks about it. We know JPMorgan had just bailed out Washington Mutual, nothing wrong in my mind with making sure JPMorgan is shored up (after all it's where I and my mother bank, so a bit of personal bias there).
So I keep meandering this article, and I get to this paragraph:
In point of fact, the dirty little secret of the banking industry is that it has no intention of using the money to make new loans. But this executive was the first insider who’s been indiscreet enough to say it within earshot of a journalist.
Now I had heard whisper of this, but I kept hearing on CNN and MSNBC how the "credit markets were starting to thaw". Which now begs the question of HOW are they doing that when supposedly the banks aren't using the money for loans?
"Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase," he began. "What we do think it will help us do is perhaps be a little bit 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 backstop."
Read that answer as many times as you want — you are not going to find a single word in there about making loans to help the American economy. On the contrary: at another point in the conference call, the same executive (who I’m not naming because he didn’t know I would be listening in) explained that "loan dollars are down significantly." He added, "We would 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." In other words JPMorgan has no intention of turning on the lending spigot.
Gee, how great, we give up $700B, and now JPMorgan Chase gets a handout of $25B, and it's not going to ease up on lending... nooooo, instead JPMorgan Chase is going to continue making itself even larger, because yeah, big banks have done SO well as we've seen.
In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation. As Mark Landler reported in The New York Times earlier this week, "the government wants not only to stabilize the industry, but also to reshape it." Now they tell us.
Indeed, Mr. Landler’s story noted that Treasury would even funnel some of the bailout money to help banks buy other banks. And, in an almost unnoticed move, it recently put in place a new tax break, worth billions to the banking industry, that has only one purpose: to encourage bank mergers. As a tax expert, Robert Willens, put it: "It couldn’t be clearer if they had taken out an ad."
So now the government is going to force a huge round of banks buying up other banks, and this is supposed to help our economy HOW?!?! They get a NEW tax break that didn't make the news, and I'm feeling like I should do a Rachel Maddow inquisitive eyebrow perk at this point and scratch my head and maybe someone here can possibly explain this to me, but I'm failing to see how this is helping our economic woes. And in point of fact, I see it NOT helping as more and more banks merge and force credit to higher and higher extremes which will hurt more and more of the American Populace. I don't know about anyone else here, but I can tell you my credit is NOT perfect. Nor is my mother's, even though she always had perfect credit, up til her stroke.
The article continues on, and you'll have to read it to see how exactly scammed the American public has been, but I will tell you that Joe Nocera is NOT happy over this. In his pursuit to get to the bottom of things, he finally catches up with Senator Dodd, to ask him his thoughts about the Banks hoarding this money and NOT lending to consumers (I haven't copied those parts or I will end up in copyright infringement, so PLEASE read the full article) and ends the article this way, a response from Sen. Dodd:
He continued: "If it turns out that they are hoarding, you’ll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay."
Let’s hope so.
Don't know about the rest of you, but as Joe points out in his article, I'm feeling like we were sold a bill of goods. Neil Kashkari should be serving his head on a platter at this point, and in point of fact I would love to know just how much Goldman-Sachs is expected to get out of this deal!