Banks NOT Lending “Bailout” Money — Instead They’re Just Keeping It!
October 15 (Bloomberg) — Treasury Secretary Henry Paulson persuaded nine major U.S. banks to accept $125 billion in government investment. Getting them to lend it out may prove a tougher sell.
The equity stakes the government is purchasing in Citigroup Inc., Morgan Stanley and seven other big institutions come with no guarantee that the investments will spur lending and unfreeze credit markets. Nor do they give the government board seats or any other leverage to demand that that the firms actually use the money to help the economy.
“The truth of the matter is, they can’t put a gun to their head and say you have to lend this money,” said Charles Horn, a former official at the Office of the Comptroller of the Currency, part of the Treasury Department, and now a partner at the Mayer Brown law firm in Washington.
Treasury officials acknowledge they can’t force banks to get the taxpayer money into the hands of their customers. Instead, officials are betting that the government’s investment will create conditions where banks have a greater incentive to earn profits from lending than to hoard money to shore up their balance sheets.
Note: B.S.! These banks are allowed to exist by authority of the U. S. government and whatever state they are formed in. If they are hurting the national interest by hoarding the “bailout” money, the Treasury Department can give them 24-hours to start lending, or revoke their national banking authority starting the 25th hour. The truth is that Paulson doesn’t have the guts to step on his buddies’ toes. Remember, he’s former CEO of Goldman-Sachs. And, BTW, Goldman-Sachs is one of the banks here getting a big chunk of our $Billions. — Chartsky