The NY Times has recently posted an article demonstrating the full stupidity of the TARP/bailout.
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."
This attitude should not surprise any of us in this community, especially since it is apparent the bankers have only their interests at heart in this deflating economy.
The basic gist of the article is that the banks that have received bailout funds are nervous about lending in this economy. Not all banks were involved in the destabilizing derivatives markets, but may be guilty of approving these easy money loans that have provided the initial shock to the financial system (note this is speculation and I will be researching this to the best of my ability).
The article primarily focuses on regional and local banks that have received TARP funds and their plans for our taxpayer money. The NY Times, in an earlier article already exposed the intentions of the 'too big to fail banks,' that unfortunately generated the outrage it deserved.
It seems the banks are more interested in using the bailout money as insurance for the coming hard times
For City National Bank in Los Angeles, the Treasury money "really doesn’t change our perspective about doing things," said Christopher J. Carey, the bank’s chief financial officer, addressing the BancAnalysts Association of Boston Conference in November. He said that his bank would like to use it for lending and acquisitions but that the decision would depend on the economy.
"Adding $400 million in capital gives us a chance to really have a totally fortressed balance sheet in case things get a lot worse than we think," Mr. Carey said. "And if they don’t, we may end up just paying it back a little bit earlier."
Gee I wish Paulson and the Treasury would give me $400 million to fortress my balance sheet. In fact, I would lend out $390 million for economic development and then go on trade mission somewhere warm and primitive with the remaining $10 million. Ultimately, that may be some the plans of some of these bankers.
Looking at some of diaries out there tonight like SmileySam's, this attitude disgust me. The TARP as administered by Paulson has been a complete perversion of the intent of the legislation passed by Congress. And we are to expect that Geithner, et al. will be much different.
This is what happens when there is no actual accountability, you get this
He said the bank had not yet decided what to do with its bailout money, which he called "opportunity capital." Increased lending would be a priority, said Mr. White, who did not rule out using it for other acquisitions, adding that when regulators invited PlainsCapital to apply for federal dollars, there were no conditions attached.
So apparently the TARP program is about as well managed as any other BS cooked up by this Congress and the Bushies in the last couple of years. On top of that, it really doesn't do much to dismiss the notion that the whole purpose of TARP was to loot the Treasury.
The article states that (as reported elsewhere)
He said the bank had not yet decided what to do with its bailout money, which he called "opportunity capital." Increased lending would be a priority, said Mr. White, who did not rule out using it for other acquisitions, adding that when regulators invited PlainsCapital to apply for federal dollars, there were no conditions attached.
The report concluded that the Treasury’s top priority seemed to be to "stabilize financial markets" by simply giving healthy banks more money and letting them decide how best to use it. The report also said it was not clear how giving billions to banks "advances both the goal of financial stability and the well-being of taxpayers, including homeowners threatened by foreclosure, people losing their jobs, and families unable to pay their credit cards."
I love Obama. I do. But I don't trust the moneychangers in the damned temple. Larry Summers,Rubin, Geithner, Volcker (oh god how he is lionized for all the wrong reasons -- he is as guilty as Greenspan for this current crisis) none of these guys really care about you and me. They care about their flawed theories (and defending the flawed math and assumptions inherent in economics, but that's another post I am working on) regarding the economy, they care about their egos. That's why they could comfortably craft a fairly mediocre stimulus proposal with tax cuts being proposed that will help nothing except bankrupt the US government faster. None of these guys knows what to really do and they are incapable or unwilling to say so. Its not a part of the culture.
TARP II will be likely similar to TARP I, except I imagine that these smaller banks won't take any money unless they really need it especially if the intent of the legislation is enforced by the Obama administration. But that doesn't seem likely as there is talk of making an 'aggregator' bank to buy up all the toxic assets (which we don't know how much is held by US banks still) from US banks and we the taxpayer hold onto indefinitely until they might be worth something again.
The US Asset Black Hole Bank. Maybe we can establish another currency based on the depreciation and devaluation of these assets over time. The currency will grow in value as the value of the assets approach the actual value of the paper and ink (or hard disk space) used to create them. Maybe we can get these TARP banks to re-invest their funds in something that is most assuredly going to rapidly appreciate in the near term. This is what they have to be thinking.