Comments on: Treasury Handouts Focus on Strongest Banks, Forcing Weaker to Fail or Sell

By: RangerTurtle

RangerTurtle — Wed, 29 Oct 2008 19:37:00 +0000

I thought the strategy was to get rid of insolvent banks, recapitalize the remaining banks and hence, confidence would be restored and that all banks are then solvent and can be lent to and lent from.

Of course it would have been better to put strong contigencies on the TARP money, like paycuts and especially, NO using TARP funds to buy other banks!

By: Anonymous

Anonymous — Wed, 29 Oct 2008 17:03:00 +0000

I suspect that recapitalizations of KEY and FITB were done to improve confidence in these banks. They’re still suspect in my mind.

If the recapitalizations were targeted to only strong banks, then why has US Bancorp not recieved any investment from Kaskari?

By: tompain

tompain — Wed, 29 Oct 2008 14:51:00 +0000

Even with a $20 bil writeoff of bad loans at NCC, PNC is getting a steal in that deal. NCC had the capital to make it through even with writeoffs of that magnitude. Perhaps the government knew something about NCC that the public did not, but otherwise this was a ripoff of NCC holders and a gift to PNC holders. If the government knows something, it should say so. We urgently need some transparency here, both to ensure that government is not improperly exercising its power and to give clarity to the equity markets so that they do not have to maintain a “government wipeout” premium in the cost of equity they assign to banks. Lower cost of equity for banks is in everyone’s interest.

By: FairEconomist

FairEconomist — Wed, 29 Oct 2008 13:52:00 +0000

Recapitalization should follow revaluation; otherwise the money is wasted. Buying preferred in good banks is a bad deal at current prices; buying in bad banks would be just flushing down the toilet. So the policy is good; the effects may or may not be well thought out. Normally I'd assume this was a goof; but with Paulson, diverting fees to M&A fees and greater powers for his buddies is a real possibility.

By: General Glut

General Glut — Wed, 29 Oct 2008 13:32:00 +0000

Perhaps we should call it “industrial policy by stealth”? Picking winners and losers is supposed to be un-American . . . but that is so last year.

By: Moopheus

Moopheus — Wed, 29 Oct 2008 13:30:00 +0000

Yes, it’s sort of lose-lose, isn’t it. The banks that are too weak to survive the crisis should be put out of their misery as soon as possible, and the rest need to be cleaned up. But one way or another, that does lead to fewer banks standing at the end, and the big banks having even more concentrated market share. But at this point is there a way out that doesn’t involve weaker banks failing and/or being absorbed into bigger banks?

By: Anonymous

Anonymous — Wed, 29 Oct 2008 12:22:00 +0000

eh, indeed. Although this is happening in other countries, for the benefit of our friendly investment bankers.

By: eh

eh — Wed, 29 Oct 2008 11:43:00 +0000

For a while in some quarters the word has been that this is part of the thinking: a sort of forced collectivisation. To the benefit of the FOH = friends of Hank of course.