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Bailout Scandal: Banks to use taxpayer money to buy each other out

by Ari Rutenberg

UPDATE: It has been brought to my attention that it is a bit naive to assume, as I do below, that Henry Paulson would step up and be a professional when the times called for it. Instead he has remained a banker to the last. However I am not the only one to fall for this. Paul Krugman also assumed that, as the British are doing, the US government would mandate lending requirements. Krugman quotes NYT reporter Joe Nocera from the article discussed below: "Unlike the British government, which is mandating lending requirements
in return for capital injections, our government seems afraid to do
anything except plead." Even when they are being socialist, they manage to pander to those who caused the problem.

The New York Times reports today that national banks are not planning to use the taxpayer bailout money to increase consumer lending. Instead the large banks are going to use the emergency funds, which we are going into debt to pay, to acquire the weakest banks left at very discounted prices.

These people have no shame and no morals. This is outrageous, and though not actually criminal, it feels like the companies have defrauded the American taxpayer. Hank Paulson has cast his lot with the bankers. Paulson, Bush, and the rest have intentionally put the American people further into debt in order to use this crisis to consolidate their financial power. This government is so corrupt it almost feels like it a movie. Except people are really losing their houses, jobs, and life savings.

From the NYT:

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.

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.”

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.

I don’t know about you, but I’m starting to feel as if we’ve been sold a bill of goods.

Read the full article here