Bank of America Spends $7 Billion on Chinese Bank, Then Lays Off 30,000 Workers

[Are_grits_groceries]

Ah, the sweet smell of your TARP money being used to batter the US economy senseless. First Bank of America gets $15 billion of TARP funds, and issues $9 billion worth of bonds guaranteed by the FDIC, then it spends $7 billion to buy a big stake in a Chinese bank.

Now Bank of America announces it's laying off 30,000 to 35,000 workers. Why? In part because it took over Merrill Lynch and wants to "eliminate redundancies". Now, that's entirely rational for Bank of America, as is spending $7 billion to buy up shares in a bank cheap (they got a below market price). But it's not good for the US because that money was meant to be loaned to Americans and because layoffs make the economic situation worse (and those laid of workers will immediately cost the government a ton of money.)

Economic decisions which can be rational for individual companies or people can be very bad if everyone starts doing them. A large part of the government's job at this time is to make sure that as few people are getting laid off as possible, that money loaned to banks is being loaned to businesses and consumers and so on.

To put it simply, such money should be contingent on not laying off workers. It should be contingent on actually using the money to lend. If you aren't using the money to lend; if you are laying off workers, then you shouldn't get the money. This is especially the case with purchases—if a company is in good enough shape to be doing acquisitions, it's in good enough shape that it shouldn't need Federal help.
( a long article)

http://firedoglake.com/2008/12/13/bank-of-america-spends-7-billion-on-chinese-bank-then-lays-off-30000-workers/

Why didn't they just throw the money up in the air??
Then those assholes in Congress make anybody connected to the auto workers jump through hoops for about
2% of the money they put into TARP.
They better not give Paulson one dime of the TARP money that is left.

New word: TARP -1.to fool(v)
We were tarped into giving financial institutions money.
2. a fool
GWB is the biggest tarp known to man.

[Fireweed247]

1. I feel exactly like that cat!

Who are the fools though? They are robbing us blind and it is not just the Bush administration, it is the Democratic led Corrupt Complicit Congress.

[clear eye]

12. They couldn't have done it if we had a Parliamentary system.

Given the overwhelming public opposition, it would have triggered an immediate vote of no-confidence. At the very least, they would have had to put off campaign season for a week and held proper hearings with testimony from prominent economists who largely advocated a different sort of bailout. Never have I envied the Canadian and Western European systems more than during the last few months.

[DS1]

2. Criminal

The TARP money should be retracted, boot the executives. Make them work in a coal mine for 20 years.

[Are_grits_groceries]

3. Make them work as clerks at Walmart for Xmas!! nt

[WillYourVoteBCounted]

4. Actually, those employees aren't so redundant

not 30,000

I've seen banks pull this shit and the customer service goes down the toilet.

But this is all a ponzi scheme, so maybe the CEOs don't plan to stick around
after the cards collapse.

No bailout should allow for massive layoffs.

[Idealism]

5. Problems with the article:

To put it simply, such money should be contingent on not laying off workers. It should be contingent on actually using the money to lend. If you aren't using the money to lend; if you are laying off workers, then you shouldn't get the money. This is especially the case with purchases—if a company is in good enough shape to be doing acquisitions, it's in good enough shape that it shouldn't need Federal help.

Problem #1: The reason people are being layed off is there is not enough demand at BoA to justify them being there, there isn't enough work to be done for them, so why should the company- realistically- keep paying them money when consumer spending is tanking all across the board and affecting every industry? Not realistic to base the condition of accepting bailout funds on not laying off workers in a global climate where people are spending less and less money, hence borrowing less, meaning BoA lends less.

Problem #2: With regards to purchasing other banks, Paulson wrote into the bailout bill upwards of $100 billion incentive fund for solvent banks to acquire other banks, regardless of their soundness (failing/failed or healthy), and considering they can purchase such banks at a drastically reduced cost- and they get subsidies to do so- why wouldn't they?

[Celebration]

6. I agree with number one

And, in some circumstances, number two.

[Idealism]

7. I'm not saying I agree with BoA for doing so

Just citing the reasoning for it isn't too terribly flawed (with regards to #2) :)

I usually agree with the comments of the bloggers on firedoglake, but in this case, I think the article doesn't explain possible reasons that BoA even made the moves, and if there's one thing I despise its' single-minded coverage and narrow thoughts.

[Are_grits_groceries]

8. Make them lend the money and give workers something to do.

TARP was supposedly set up to buy "toxic assets" that were causing the banks to default.
With those "toxic assets" out of the way, the banks would stabilize and begin lending to
other banks and consumers.
Instead they are hoarding the money or buying up failed banks or whatever instead of lending.
Without lending, the credit lines remain frozen, and everybody gets smacked. Also, when they buy
a failed or failing bank, they get a tax break. They aren't doing it for philanthropic reasons.
Why on earth there were no guidelines that the banks had to follow is beyond me. Did they just
assume those doofs would do what they wanted? It must have been like Xmas when they got the
money with no strings attached.

[Idealism]

9. Of course the TARP was a huge failure

Everyone who looked at the clauses and what the fund was supposed to do knew that is was bound to fail. It was supposed to buy toxic debt, after all its called the Troubled Asset Relief Program, but when regulators actually looked at the horrid assets on the books at these banks, and how confidence was falling like a rock in these entities because investors were learning just how much junk paper they held, stocks were crashing and companies were failing. It was apparent to Paulson that he needed to act quickly to save our financial sector (and triggering through that a new Depression, many agree) and he saw the need for direct liquidity. The problem is he didn't stipulate any terms for the use of such capital, and as I have stated, one clause in the acceptance of bailout funds was the potential to purchase other banking entities and get a huge sum of money for incentives if you did. I guess Paulson was channeling Greenspan in his thinking, that the CEOs would do what was best for their company in the long-term, instead of for short-sighted gain. Well, he was partially right, in the case of Bank of America. They didn't go out and purchase failing banks, because they would be forced to eat their balance sheet losses when the assets that didn't yet become worthless the bank was holding defaulted. Instead they attempted to purchase sound banks that could be added to their networth, instead of subtracted.

The hoarding of money serves is an unintended consequence, but not entirely unwelcome to the banks. They are unsure just where the bottom is (even inside their own company's balance sheets) so they are trying to keep enough cash in their 'war chest' to sustain at least their fascade of solvency. When you couple that with the fact that people just aren't spending like they used to, and thus incurring less debt, there just aren't that many people who need to be lent to. The one group that needs to be constantly lent to, businesses, is for payroll, and with more and more people becoming unemployed, that previously substantial cost will go down as well. Look for more bank acquisitions, and the look for the regulators to be forced to sit on their hands under pressure from the markets to let these happen, or face ruination of more banks.

[4 t 4]

13. IMHO you are being way to analytical

they are wrong, and anything that goes against them ( including the people) are right. This is the time to really try and stand up and fight all of it. Don't be logical (they are not) don't be in any way moral ( They are not) fight fire with fire, like they do. They do even more then fight fire with fire they use bombs. I am speaking strictly on a financial basis. I am not talking about anything violent. We have All been had and taken. Unless your at the top 1-2 percent.

[bertman]

11. "Did they just assume those doofs would do what they wanted?" Well hell yeah. That's exactly

what they thought. Our brilliant Congresspeople, especially Dems had no fucking idea WHAT to do so they bought into President Paulson's demand that we turn the treasury over to him--no strings attached.

No strings and no accountability.

Of course they knew they would do what they wanted because that's what they always do. Which is to try to get even richer than they already are--by further screwing us taxpayers who aren't smart enough or wealthy enough to hire tax lawyers to keep us from paying taxes.

[Cronus Protagonist]

10. Expect any auto industry loans to result in similar

Don't be fooled like last time, people... K?