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OK so remember how the banks need 700 gazillion megabucks so they can start lending again and so we don't have to sell apples on the street?

Well... oppsie... turns out the banks see this free money as a nice cushion or as a warchest to go buy other banks. In the meantime they'll still clamp down on lending.

thank you Hank Paulson boy genius.

http://www.nytimes.com/2008/10/29/opinion/29wed1.html?_r=1&oref=slogin&ref=opinion&pagewanted=print

October 29, 2008
Editorial
Loans? Did We Say We’d Do Loans?

According to Treasury Secretary Henry Paulson, the chief proponent of the big bank bailout, flooding the banks with taxpayers’ money was supposed to get them to start lending freely again. And that, in turn, was supposed to stabilize the markets and prevent the downturn from being worse than it otherwise would be.

It was not entirely clear from the start exactly how Mr. Paulson would ensure that things would go that way. Indeed, earlier this month, shortly after the bailout was enacted, The Times’s Mark Landler reported that Treasury officials also wanted to steer the bailout billions to banks that would use the money to buy up other banks.

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.

“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,” the executive said. He added that the money could also be used as a backstop in case “recession turns into depression or what happens in the future.”

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.

JPMorgan Chase is not alone. The Wall Street Journal reported on Tuesday that some regional-bank recipients of the bailout money had acknowledged that only a small portion would be used for loans and the rest for acquisitions and other purposes.

It is prudent for government officials to encourage healthy banks to acquire weak banks. Doing so prevents bank failures and avoids the taxpayer costs and economic disruption that accompany such collapses.

The problem is that the Treasury has refused to put conditions on the banks’ use of the bailout funds, allowing them, in effect, to make purchases of banks that are not on the verge of failure. That could help to maximize the banks’ profits — a worthy goal when the capital they are using is from private investors.

However, when they’re using taxpayer-provided capital, as they are now, Congress and the public have every right to require that the money be used to benefit the public directly, even if doing so crimps the banks’ profits. If Treasury won’t impose conditions, Congress must, including a requirement that banks accepting bailout money increase their loans to creditworthy borrowers and limit their acquisitions to failing banks, such as those listed as troubled by the Federal Deposit Insurance Corporation. The bailout should not be an occasion for banks to make a killing.

An even bigger problem is that the bailout was sold as a way to spur loans. If that never was — or no longer is — the primary aim, Congress and the public need to know that. Lawmakers should not release the second installment — $350 billion — until they have answers and guarantees that the bailout money will be spent in ways that put the public interest first.

I'm sorry are we supposed to be surprised that our government is going against what it told the public? *Gasp*

As soon as they approved it (with 70%+ disapproval rating) I knew we were in for a ride that will only end with either a depression or a coup.

Don't worry the GM/Chrylser baikout will open up credit,and fuel effiicent cars! What? Congress is meeting with the auto executives in closed door sessions?... oh well never mind. Socialism, er government/corporate partnership at its finest. Socialize losses, privatize gains.

Whats the difference between the parties again? Oh yea, everyone in Washington is one party, everyone outside of Washington is another. Time to vote for Me as write in Candidate. Remember a vote for Frazzled and the Il Duce Party is a vote for Freedom. I'll set these boys straight and make the trains run on time.

The Elder Party promises an end to deficits, an end to gridlock and an end to envornmental problems.

In fact the Elder party promises and end to everything...

That's why the UK bailout plan was structured differently and basically amounted to part nationalisation of some banks so that the government can direct them to make loans if needed.

That happened in the US as well, most people just don't know about it. The government "invested in" at least 4 or 5 large banks. By "invested in" I really mean they bought at least 60% of the company out. The major problem with our "bailout" is that even though Mr. Paulson made such a boneheaded maneuver there is a clause (at least in the one I read) that says he cannot be held accountable for how the money is spent at all. This means he could have pocketed it and the government couldn't do anything about it. I don't know if the clause made it into the final draft (I hope not) but the more one understands about the situation the more one realizes how entirely f'd America is right now.

The blame game isn't helping anyone right now either.

Pook wrote:That happened in the US as well, most people just don't know about it. The government "invested in" at least 4 or 5 large banks. By "invested in" I really mean they bought at least 60% of the company out. The major problem with our "bailout" is that even though Mr. Paulson made such a boneheaded maneuver there is a clause (at least in the one I read) that says he cannot be held accountable for how the money is spent at all. This means he could have pocketed it and the government couldn't do anything about it. I don't know if the clause made it into the final draft (I hope not) but the more one understands about the situation the more one realizes how entirely f'd America is right now.

The blame game isn't helping anyone right now either.

Ah, I don't think we're "f'd" at all. Things have gotten bad, and may get worse, but this isn't the great depression. In all probability, things will get better, it is just a matter of time. I think the voice of fear has contributed to our situation. I know someone who has lost their job or their home is not going to agree with me, and I definitely think there are people out there who need help...Not just individuals, I believe. I think we may have to bail out companies who have been mismanaged due to greed and shortsighted fiscal policy. Either way we *will* make it through, and for most of us that means just staying the course. I haven't moved my 401k out of large/small cap stock and into bonds, or anything like that. I really am convinced that panic is the real enemy right now.

What gets me about this is that when the crap really hit the fan these guys put all of their copies of The Fountainhead and Wealth of Nations right back up on the bookshelf and went to the government with their hands out. All of a sudden the government didn't seem so big and bad after all, especially when it was they who were going broke. Who is going to bail me out if I go out and try to start a business and I can't hack it?

I agree with you that things will turn around, and that the economy (surprisingly) is not in that bad of shape it's just people being panicky (the news stations are not helping either right now). I don't think though that we have seen the bottom yet, mainly due to said panic and "news" stations.
I would be extremely happy if I was wrong, and like you I'm not pulling out my money as that only contributes to the problem, but I fully expect things to get worst before they get better, in the long term.

As the saying goes, hope for the best but prepare for the worst.

What I read is that the estimate of losses is about £1.8 trillion and while some of these losses will never be realised (the assets will not go bad) there are other as yet undiscovered losses. However, the total losses probably aren't more than £1.8 trillion.

Intervention by governments, central banks and the IMF already amounts to over £4 trillion, so in theory we are all in clover!

Aso Taro PM of Japan announced today that in 3 years time the comsumption tax in Japan will rise an undisclosed ammount. After reading this editorial that I was waiting (I hoped to be proven wrong but...) I wonder why I will have to pay more taxes every time I buy something if the money will end up in the pockets of Mr Aso´s friendly banks?

When is the Emperor coming out of the warp to solve our problems again?.

M.

Miguelsan wrote:Aso Taro PM of Japan announced today that in 3 years time the comsumption tax in Japan will rise an undisclosed ammount. After reading this editorial that I was waiting (I hoped to be proven wrong but...) I wonder why I will have to pay more taxes every time I buy something if the money will end up in the pockets of Mr Aso´s friendly banks?

When is the Emperor coming out of the warp to solve our problems again?.

M.

Aso's move could be an anti-deflation move. When I was last paying attention the big issue in Japan was after the bursting of the bubble and more openness to imports prices for everything came down.

this was actually a bad thing since no one wanted to spend money now knowing things might cost less later.

Threatening to raise sales taxes means things in the future will cost more so you should buy now.

Just a guess though. Japan is weird.

Your faith in the classic economy is refresing friend KK are you sure this is not another move by a politician to help banks?

M.

Miguelsan wrote:Aso Taro PM of Japan announced today that in 3 years time the comsumption tax in Japan will rise an undisclosed ammount. After reading this editorial that I was waiting (I hoped to be proven wrong but...) I wonder why I will have to pay more taxes every time I buy something if the money will end up in the pockets of Mr Aso´s friendly banks?

When is the Emperor coming out of the warp to solve our problems again?.

M.

Only on his birthday and January 2nd.

It was raising consumption tax from 3% to 5% that was thought to have put a dent into the recovery in the last downturn in Japan.

Consumption tax is regressive since it hits everyone equally including those on low and fixed incomes such as pensioners. A rise in income tax would be a fairer move.

Of course the banks aren't loaning money. The vast majority of people simply cannot qualify. The issue isn't with the banks, at least not right now. It's with the pathetic state of real wages. If US banks issued loans now, especially with the uncertainty of the future tax code, they would be throwing the money away. The first 350 million was meant to keep stock prices afloat, the next will likely be sent in as restricted capital to be directed as loans. It really is going to come down to who the next President is, and how their tax policy is going to impact individual income.

Grignard wrote:
What gets me about this is that when the crap really hit the fan these guys put all of their copies of The Fountainhead and Wealth of Nations right back up on the bookshelf...

What irks me so damn terribly is the extent to which Ayn Rand is viewed as a legitimate philosopher. The Wealth of Nations was a brilliant book, but if you really want help understanding it's ins and outs you should be reading Hobbes and Locke. And, *gasp*, maybe even just a tiny bit of Marx. Not that I presume the average Wall Street man has actually read The Wealth of Nations. Rather, I suspect they went through a basic economics program that taught them a very old-fashioned kind of macro-economics which relies on closed borders, and the disproportionate wealth which maintains them.

The economy isn't as bad as CNN makes it out to be. Quit watching the news already.

I have a home on the market now. Sucky time to be selling, but oh well. I've gotten several lowball offers even one just this past monday. Everyone making an offer has been pre-approved for a mortgage and one had credit that's less than stellar, but they still got their loan. We're just not interested in selling 50k under our asking price.. we're already priced lower than the area, people are just being cheap right now.

As far as the bailout goes....... did anyone actually expect banks to not just keep the money for themselves? It's like expecting GW to lower their prices. It something that just doesn't happen.

No, they will share the money with the guys at the Capitol, it´s traditional.

M.