A New York Times reporter was given the number for a private JPMorgan Chase employee conference call that took place yesterday, and he listened in.
From the article:
Given the way, that is, that Treasury Secretary Henry M. Paulson Jr. had decided to use the first installment of the $700 billion bailout money to recapitalize banks instead of buying up their toxic securities, which he had then sold to Congress and the American people as the best and fastest way to get the banks to start making loans again, and help prevent this recession from getting much, much worse.
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.
So these banks are using our tax dollars NOT to help Main Street or to lessen the tremendous pressure in the credit markets -- but to benefit themselves.
When asked whether JP Morgan Chase would use any of the bailout money to make loans and loosen the credit market, the executive said:
"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."
You read that right. That was the executive from JPMorgan Chase gleeful over this windfall to increase their bottom line -- even acknowledging that the money they got could actually do more good if it went to the hard hit!
Joe Nocera, the Times reporter breaking this story, wrote:
What I am saying is that Mr. Dimon [CEO of JPMorgan Chase] took the $25 billion [taxpayer bailout money] on the condition that his institution would start making loans. There are plenty of small and medium-size businesses that are choking because they have no access to capital — and are perfectly capable of repaying the money. How about a loan program for them, Mr. Dimon?
But Morgan Chase thinks it can earn a lot more money for its shareholders by using the money for mergers and acquisitions instead.
And -- surprise suprise, the Bush Admin is offering new corporate tax breaks to these companies that do acquire other companies, as well as additional bailout dollars when a big bank acquires another bank. In fact, Nocera says it's been made clear to the banking world that they don't really need to use the money for loans, buying other banks to serve their shareholders is just fine -- it's all in the article.
Isn't it a good thing we rushed through that $750 billion bailout/rescue so the big banking institutions -- the ones which are actually in solid shape financially -- can use the money feather their nests and improve their bottom lines at taxpayer expense?
The writer compares Paulson's declarations that giving money to these banks is the best way to "help get loans going" is in fact a "WMD" argument -- that is, he says it was a bogus, deceitful pretext to take the money from the taxpayers, a lie, just like using WMD as a pretext to invade Iraq. The real reason is to make Bush contributors more wealthy. He pulls no punches in the article.
The great theft from the middle class to the upper class continues in this ingenious bailout, designed to saddle generations with debt that goes into the pockets of the rich. It's nothing less, and Democrats fell for and approved it.