October 14, 2008
|Half of the bailout money will end up in banks that don’t actually need to be “rescued.”|
Forbes calls it “Bailout II,” the Treasury Department’s “injection” of capital into selected banks, thus “following in the footsteps of European governments in an effort to restore confidence to the ailing financial system.” Later today, Bush, Paulson, Fed boss Bernanke, Federal Deposit Insurance Corp. chairman Sheila Bair, and “other economic officials will announce details of the revised $700 billion economic rescue plan,” according to Forbes.
But here’s what Forbes does not tell you: half of the money will end up in banks that don’t actually need to be “rescued.” Last month, Bush and his Wall Street cronies told us the bailout would be aimed at the mortgage market, and yet JPMorgan Chase, Bank of America, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, and others will walk away with over $125 billion and it has nothing to do with the engineered “distress” of the mortgage market. As the Hartford Courant notes, this “is part of a wider plan that goes beyond the $700 billion rescue package approved by Congress earlier this month.”
“Here’s the kicker,” writes the Economic Policy Journal blog. “The shares will not be dilutive to current shareholders, a concern to banking chief executives, because perpetual preferred stock holders are paid a dividend, not a portion of earnings. In other words, all current shareholders are protected, unlike Lehman, Bear Stearns, Fannie Mae and Freddie Mac shareholders.”
- A d v e r t i s e m e n t
To make sure this mega-grand larceny follows a schedule, Paulson and crew have hired the investment consulting firm Ennis Knupp and Associates to “advise on the implementation of the bailout/rescue plan,” that is to say advising the fleecing of the American taxpayer. The contract will last for one year and pay Chicago-based Ennis Knupp $2,495,190, according to the Washington Post.
The feeding frenzy will not be limited to Wall Street banks. On October 10, Times Online reported “that the US Treasury has been overwhelmed with requests from executives from other distressed industries, including the US car industry and America’s struggling airline business, seeking a similar bailout scheme for themselves.”
For now, Paulson and crew say the bailout is restricted to their buddies on Wall Street, although all of that may change after the corporate socialist Obama is elected next month.
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