by Deb Cupples | The $700 billion bailout plan was sold to Congress (and to us taxpayers) as an absolutely necessary means of getting banks to again start lending money to businesses, people, and other banks -- the goal being to unfreeze the credit market.
The New York Times points out that some bailout-fund recipients aren't planning to use a large portion of our tax dollars to start lending again:
"Now, lo and behold, with $250 billion in bailout funds committed to dozens of large and regional banks, it turns out that many of the recipients of this investment from taxpayers are not all that interested in making loans. And it appears that Mr. Paulson is not so bothered by their reluctance.
"Mr. Paulson and the bailout recipients have some explaining to do. Congress should plan hearings as soon as possible — and take action to set a clear strategy.
"In his column on Saturday, The Times’s Joe Nocera told about a conference call that he had listened in on recently between employees and executives of JPMorgan Chase. Asked how an infusion of $25 billion of bailout funds would change the bank’s lending policy, an executive said the money would be used to buy other banks...."
"There was not a word about lending — not to businesses or home buyers or car buyers or students or other consumers. Just the opposite. In response to another question, the executive said that the bank expected to continue to tighten credit. (NY Times)
The news gets even worse, according to the Associated Press:
"[R]eports surfaced that bankers might instead use the [bailout] money to buy other banks, pay dividends, give employees a raise and executives a bonus, or just sit on it."
None of this should come as a surprise to anyone who's been paying attention for the past eight years.
Of course corporate executives would try to funnel money to themselves in the form of bonuses. Why? Because they can.
How did they get this ability? Because Neither Congress nor the Bush Administration put tight legal restrictions on how bailout-fund-receiving corporations could spend our tax dollars.
It's that simple.
Instead, Congress and the Bush Administration simply gave away truckloads of money and hoped that the same executives who helped create the current crises would do the right, honorable and patriotic thing -- i.e., help our economy by making more loans.
Our government officials often rely on the corporate "honor system" when dolling out favors to corporations. Consider President Bush's corporate tax cuts, which were sold to Congress (and to us taxpayers) as a necessary way to free up money so corporations could create new jobs.
Despite the extra money that corporations saved from the tax cuts, thousands and thousands of jobs continued to fly overseas.
Why? Because Congress and the President gave the tax cuts with no strings attached: i.e., without legally requiring corporations to actually create jobs.
No, our government officials are not stupid. Many of them have been around long enough to know that -- as a practical matter -- they cannot rely on the honor of the people running our nation's big corporations: i.e., we cannot rely on those people to put aside self-interest for the sake of our nation's health.
And yet, Congress and the Bush Administration rushed to pass the bailout bill without imposing strict conditions on how our hundreds of billions of tax dollars would be spent.
Consolidation of Financial Institutions
Both the New York Times and Associated Press articles quoted above stated that financial institutions want to use bailout dollars to buy other financial institutions.
I'm frightened by the mere thought of financial institutions' becoming huge conglomerates by buying up other financial institutions.
Why? Because the bigger a financial institution is, the more impact it will have on our nation's economy if things go sour for that institution.
Consider AIG (American International Group), for example. In September, it became apparent that AIG would likely fail -- apparently due to poor management or investment strategies.
In September, we taxpayers committed $85 billion to preventing AIG from failing. A few weeks later, we taxpayers committed another $37.8 billion to helping AIG, because the first $85 billion didn't seem to be enough.
Why did we taxpayers commit more than $120 billion to keeping a private company from falling?
Because AIG is the largest insurer in the world. If AIG had fallen, the effect on our nation's and other nations' economies reportedly would have been horrible.
In short, AIG was too big for us taxpayers to let that company fall.
And yet, our government officials don't seem concerned at all that financial institutions are actively seeking to grow larger and larger -- or that said companies are using our tax dollars to fund that potentially dangerous growth.
Certainly, something seems to be amiss -- but what do I know? I'm no expert on economics or high finance.
Apparently, neither are some of the executives who drove their massive companies toward ruin over the past few years.
Other Buck Naked Politics Posts:
* Cutting Executive Pay Would Save Jobs
* Lehman Execs Redistribute Shareholder Wealth (to Themselves)
* AIG Execs Redistribute Shareholder Wealth (to Themselves)
* Execs Made Millions While Driving Companies into Ditch
.
Comments