Washington told taxpayers a major rationale for us to fork over $700 billion to banks was to save the American economy by making loans more accessible, but it looks like at least at Chase they rather use it to buy other banks, NYT reports.
Times reporter Joe Nocera listened in on a Chase employee-only conference call and one employee asked, “Chase recently received $25 billion in federal funding. What effect will that have on the business side and will it change our strategic lending policy?”
Translation: When are we going to start making loans?The executive moderator replied:
Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase.. What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. 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 and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.
Later, the same executive said,
We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.
Translation: We’ll use that $25 billion as a war chest to buy other banks, and hoard it in case times get tougher.
“Read that answer as many times as you want,” wrote NYT, “You are not going to find a single word in there about making loans to help the American economy.”
Furthermore, a new tax break allows banks to immediately deduct any losses they that are on the books of the banks they acquire.
What is the government doing to make banks use the money for loans? Apparently, jack, except for asking really really nicely. If this continues and banks don’t use their government handout to open up loans, this bailout will be the single greatest ripoff in American history, and those responsible are naive if they don’t think they’ll have a giant bloody revolution on their hands—and I mean that in the literal sense.