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Bailout money intended to reshape industry, not make new loans

post #1 of 21
10/26/08 at 2:25pm
Thread Starter 
NY Times, Talking Business, Friday Oct 24: So When Will Banks Give Loans?

Quote:
It is starting to appear as if one of Treasury’s key rationales for the recapitalization program — namely, that it will cause banks to start lending again — is a fig leaf, Treasury’s version of the weapons of mass destruction.

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.

...Friday delivered the first piece of evidence that this is, indeed, the plan. PNC announced that it was purchasing National City, an acquisition that will be greatly aided by the new tax break, which will allow it to immediately deduct any losses on National City’s books.

As part of the deal, it is also tapping the bailout fund for $7.7 billion, giving the government preferred stock in return. At least some of that $7.7 billion would have gone to NatCity if the government had deemed it worth saving. In other words, the government is giving PNC money that might otherwise have gone to NatCity as a reward for taking over NatCity.
Make sure you read the whole article even though it looks like the author is changing gears at the bottom of page 1.

George W. Bush will be credited as the President that rang the death knell for democracy in this country. Appearances with voting rights aside, we have become a plutocracy.

Laurie
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post #2 of 21
10/26/08 at 3:05pm
Erm, how is this suddenly all GWB's fault???? The Senate passed the crap bill, with the add-ons, the House approved it, and Bush had little to no choice to sign it unless he wanted to watch a worse collapse.

Paulson's the one doling out the monies, supposedly with Congressional oversight. That's probably Barney Frank and Chris Dodd.
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post #3 of 21
10/26/08 at 3:24pm
Quote:
Originally Posted by neetanddave View Post
Erm, how is this suddenly all GWB's fault???? The Senate passed the crap bill, with the add-ons, the House approved it, and Bush had little to no choice to sign it unless he wanted to watch a worse collapse.

Paulson's the one doling out the monies, supposedly with Congressional oversight. That's probably Barney Frank and Chris Dodd.
Bush and Paulson were the ones who came up with this idea from the beginning. The version they offered had no oversight. And the original version with some oversight was rejected by the House Republicans who came around after all of the add-ons. Sorry, but this was GWB's solution to the whole mess.
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post #4 of 21
10/26/08 at 3:49pm
Okay, blame him if you like. I think there's plenty to go round.

Even Rep. Arthur Davis shares the blame: "Like a lot of my Democratic colleagues I was too slow to appreciate the recklessness of Fannie and Freddie. I defended their efforts to encourage affordable homeownership when in retrospect I should have heeded the concerns raised by their regulator in 2004. Frankly, I wish my Democratic colleagues would admit when it comes to Fannie and Freddie, we were wrong."
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post #5 of 21
10/26/08 at 4:09pm
I'm not blaming him for the whole crisis. That has so many causes that everyone is to blame. But this solution is his and he has started the largest socialization of the banking industry.
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post #6 of 21
10/26/08 at 5:08pm
Who's to blame misses the point. The point is: Are the banks using the money to start lending again or is the whole thing a scheme to enable the larger banks to acquire the weaker ones?

Are we becoming a nation where the banking industry and the government are so intertwined that the government is serving the banks and not the people?
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post #7 of 21
10/26/08 at 5:24pm
Thread Starter 
Quote:
Originally Posted by neetanddave View Post
Erm, how is this suddenly all GWB's fault???? The Senate passed the crap bill, with the add-ons, the House approved it, and Bush had little to no choice to sign it unless he wanted to watch a worse collapse.

Paulson's the one doling out the monies, supposedly with Congressional oversight. That's probably Barney Frank and Chris Dodd.
This isn't about the crisis in terms of who is to blame, it's about the master-minding of the bailout package. Bush appointed Paulson and this is their plan. Perhaps you didn't read page 2 of the article - Dodd is pissed. And as you may recall, approval happened when the bailout was passed, and oversight is then after-the-fact.

Laurie
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post #8 of 21
10/26/08 at 6:03pm
Quote:
Originally Posted by LDG View Post
This isn't about the crisis in terms of who is to blame, it's about the master-minding of the bailout package. Bush appointed Paulson and this is their plan. Perhaps you didn't read page 2 of the article - Dodd is pissed. And as you may recall, approval happened when the bailout was passed, and oversight is then after-the-fact.

Laurie
But I thought GWB is an idiot who knows nothing??? How can he be blamed for putting together a package to "ruin democracy?" Everyone not a conservative Republican says he's a fool.... can't have it both ways.

And Dodd's probably upset cause he missed a piece of the pie somewhere.
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post #9 of 21
10/26/08 at 6:36pm
Thread Starter 
Quote:
Originally Posted by neetanddave View Post
But I thought GWB is an idiot who knows nothing??? How can he be blamed for putting together a package to "ruin democracy?" Everyone not a conservative Republican says he's a fool.... can't have it both ways.

And Dodd's probably upset cause he missed a piece of the pie somewhere.
I've never said he was a fool - and his getting us to go to war in Iraq when the terrorist attack on the twin towers had nothing to do with Iraq and there were no WMD was a master stroke. The passage of the Patriot Act with no discussion or dissent was (IMO) unprecedented when it came to consolidating power and "ruining" democracy as we know it - certainly in undermining our civil liberties as provided by the Bill of Rights. I don't think Bush is smart - but I believe he is very cunning and knows how to use smart people.

Laurie
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post #10 of 21
10/26/08 at 8:01pm
This is very scary stuff Laurie. Where's the oversite in the bailout?
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post #11 of 21
10/26/08 at 8:04pm
Wow, we just keep getting lied to and lied to and lied to ... It's completely demoralizing.
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post #12 of 21
10/26/08 at 8:06pm
Quote:
Originally Posted by Momofmany View Post
This is very scary stuff Laurie. Where's the oversite in the bailout?
I heard yesterday, I think, that the people getting paid a hefty sum to do the "oversight" are the same ones who landed us in this mess.

There's so much contempt for us - the citizenry - inherent in these arrogant actions of the government, it's sickening.
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post #13 of 21
10/26/08 at 8:50pm
Quote:
Originally Posted by katachtig View Post
Bush and Paulson were the ones who came up with this idea from the beginning. The version they offered had no oversight. And the original version with some oversight was rejected by the House Republicans who came around after all of the add-ons. Sorry, but this was GWB's solution to the whole mess.

Plenty of Democrats voted against that first bill also, if you remember.

To bad they didn't vote down the second one also.
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post #14 of 21
10/26/08 at 8:54pm
Quote:
Originally Posted by Brokenheart View Post
I heard yesterday, I think, that the people getting paid a hefty sum to do the "oversight" are the same ones who landed us in this mess.

There's so much contempt for us - the citizenry - inherent in these arrogant actions of the government, it's sickening.
You are so right. Both parties have let us down big-time with this.

But think what will happen if we have a Democratic President AND a Democratic Congress.

That is the scariest thing to me.
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post #15 of 21
10/26/08 at 8:55pm
Quote:
Originally Posted by ckblv View Post
Plenty of Democrats voted against that first bill also, if you remember.

To bad they didn't vote down the second one also.
Pelosi delivered the votes she promised for the 1st vote. Boehner did nothing and allowed the Republicans to definitely kill the bill. The Democrats wanted a bi-partisan effort. The Republicans turned their back on it.
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post #16 of 21
10/26/08 at 8:56pm
Quote:
Originally Posted by ckblv View Post
You are so right. Both parties have let us down big-time with this.

But think what will happen if we have a Democratic President AND a Democratic Congress.

That is the scariest thing to me.
Couldn't be any worse than a Republican president and Republican congress who cut taxes and ran up the worst deficit in the history of the country. We have over $10 TRILLION in debt that the younger generations are going to be saddled with.
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post #17 of 21
10/26/08 at 9:07pm
Here is an interesting article.

The first bailout bill required NO oversight. That's why the Republicans wouldn't vote for it

http://thinkprogress.org/2008/09/23/paulson-oversight/

Quote:
This morning, Treasury Secretary Henry Paulson testified before the Senate Banking Committee on the current financial crisis. Nearly every senator on the panel criticized the $700 billion bailout plan Paulson proposed this weekend, with many calling for stronger oversight.

In his opening statement, Paulson struck a defensive tone, blaming Congress for misunderstanding him in thinking he didn’t want robust oversight. He just didn’t want to be “presumptuous,†he explained:

We gave you a simple, three-page legislative outline and I thought it would have been presumptuous for us on that outline to come up with an oversight mechanism. That’s the role of Congress, that’s something we’re going to work on together. So if any of you felt that I didn’t believe that we needed oversight: I believe we need oversight. We need oversight.
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post #18 of 21
10/26/08 at 9:12pm
Quote:
Originally Posted by ckblv View Post
Here is an interesting article.

The first bailout bill required NO oversight. That's why the Republicans wouldn't vote for it

http://thinkprogress.org/2008/09/23/paulson-oversight/
That was the initial proposal. What the House voted down was a bill that came after negotiations between the White House and the Congress. This was the bill that McCain suspended his campaign for that everyone voted down.
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post #19 of 21
10/27/08 at 2:26am
Quote:
Originally Posted by katie=^..^= View Post
Who's to blame misses the point. The point is: Are the banks using the money to start lending again or is the whole thing a scheme to enable the larger banks to acquire the weaker ones?

Are we becoming a nation where the banking industry and the government are so intertwined that the government is serving the banks and not the people?
If you're AIG you're using it for weekend resort holidays and European hunting trips for your executives.

Sorry, I couldn't resist taking the shot.
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post #20 of 21
10/27/08 at 11:02am
Thread Starter 
What I don't get and haven't looked into at all is - couldn't they have made provisions in the bailout bill for how the capital injections were supposed to be used by the banks? I also don't know how you oversee that.

For the record, of the 100 senators, 48 are democrats, 2 are independent, and 50 are republican. On the bailout, 9 dems voted no, Ted Kennedy didn't vote, and 15 republicans voted no. Of the two independents, Lieberman voted yes, and Sanders voted no.

Laurie
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post #21 of 21
11/5/08 at 9:30am
Thread Starter 
Just in case anyone remains interested in this issue, here's an article discussing the tax breaks being provided to the companies receiving injections of cash from the bailout plan:

http://www.financialweek.com/apps/pb...311039969/1028

Quote:
The Treasury's latest move waives a provision of Section 382 of the tax code for financial institutions. Normally, this provision would limit the extent to which “recognized built-in losses” can be used to offset taxable earned income after the completion of an acquisition. For PNC, which received a $7.7 billion cash infusion as part of the CPP, the benefits are enormous, as all of the approximately $20 billion in losses the bank inherited from National City's loan portfolio would be treated as ordinary losses that could be used to offset such income. PNC could carry those losses back two years to offset income and potentially receive a tax refund, and then carry whatever losses are left forward for 20 years into the future.

“PNC will be able to utilize those losses to reduce its taxable income without limit,” said Robert Willens, who runs a tax and accounting consultancy in New York. “The present value of the tax savings that PNC will enjoy from this relaxation of the normal prohibitions against "trafficking' in losses will equal or exceed the entire amount PNC is paying for the stock of NCC.”
The government is essentially enabling the large banks to make acquisitions for free through various tax breaks.

Laurie
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