A Note About the Bailout

[Donnachaidh]

http://www.opednews.com/articles/A-Note-About-the-Bailout-by-Mike-Kirchubel-090115-218.html

A Call for the Separation of Corporation and State


On CBS national news last night (1/12/2009), Katie Couric announced that some banks were using their "Bailout" money--not to make loans or cover bad debts as had been promised, but to buy up competing banks. Folks, this is not news. Did somebody at CBS finally read my December article, "This Financial Mess--Causes and Cures?" Here is part of the article:

Section 8 of the actual Bailout Bill that passed Congress: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." Does the Constitution allow the Legislative Branch to concoct a law that says it cannot be questioned by Judicial Branch? Why would that wording be put into this bill? Well, in article published in the October 24, 2008 New York Times, the newspaper's economic columnist, Joe Nocera, reveals "the dirty little secret of the banking industry," that many banks have no intention of using the government bailout money to make new loans. The plan to hand over $350 billion in taxpayer money to the biggest banks was never intended to get them to resume lending to businesses and consumers. Its real aim was to bankroll a rapid consolidation of the American banking system by subsidizing a wave of takeovers of smaller financial firms by the most powerful banks. The weak banks use bailout money to help shore-up their balance sheets and then, when they are fattened-up, the strong banks use their money to gobble them up.

With the Bailout Bill, the Federal Reserve is now authorized to pay banks interest on their reserves. Picture it this way, if banks were hardware stores, the store owners would be paid by taxpayers to stock their shelves with merchandise. Pretty sweet deal. Where do the "Feds" get the money to pay the banks this interest? If you said taxpayers, you are correct. That's tens of billions more of our taxpayer dollars that will never build a road or school. But maybe I'm exaggerating the cost, because Section 202 permits the Federal Reserve to change the fractional reserve ratio for banks to ZERO! This means that a bank need not maintain a penny in reserves to back that million-dollar loan for your home.

But wait, that's not a problem either! Section 132 allows for the suspension of "mark to market" accounting for banks. Now, when a bank holds that $1 million mortgage in foreclosure on your property currently worth $400 thousand, it will still show up on their books as worth a million. With hundreds of these mortgages on their books, just how does an investor determine which bank shares are worth buying? How does anyone know which banks are failing and which are doing well? Maybe that's the point.


MORE at the link above --

[JuniperLea]

1. I've always thought...

That the rush for banks to buy up other banks was to accumulate more debt... so they could get more money from the Fed.

The ratings companies, Standard and Poor's, AM Best, etc., should be flogged, drawn, and quartered for keeping the ratings artificially high on all banks and securities traders. For example, AIG's rating was AAA Best, as I recall, a month prior to their beggar's banquet.