Bank Takeover Artists Benefit From TARP Loophole


As we discussed last week, the banking bailout bill is helping mega-bank takeover artists like Wells Fargo, Bank of American and others. As I predicted last week, the Paulson plan to give these predatory banks a direct cash injection to continue their bargain hunting, this week went into full overdrive without a word of dissent from regulators, Congress, or consumer groups. Paulson announced the Treasury would take a “stake” in nine mega banks with $250 Billion. The government would get some warrants in exchange and share in the upside down the road.

People are incorrectly calling this move a “nationalizing” of the banking industry. It’s not. It’s simply a signal to the smaller banks who won’t get any subsidy, “Watch your back, Jack!”. Even though the TED spread dropped toward the end of the week, it was nothing to write home about. So the banks are still suffering from the same “ailments” we had last week, but the media spin is different.

Suffice it to say, those banks not hand-picked by Paulson, are getting squeezed by no liquidity in the capital markets and now will have a vulture looking over their shoulder for the next mis-step.

I learned something new about the TARP system Paulson initially said the $700 billion would be used for…the buying of “troubled assets” from the banks. TARP rules state a bank can’t “flip” bad loans to the government…buy them at a discount from one bank and resell to Paulson for a profit.

That’s a no-no…as it should be.

However, there’s a loophole!

If the bank obtained the bad loan through a merger, acquisition (read takeover), bought them out of a conservatorship (what typically happens when a bank is shut down by the FDIC) ….these TARP “unjust enrichment” rules do NOT apply!

If this isn’t the biggest motive in all the world to gobble up more banks…I don’t know what is!


The unmitigated greed these guys have…the nine banking moguls who met with Paulson this week just got handed the keys to the kingdom.

And we all sat here barely noticing…doing nothing…saying nothing…probably not even sure it was what was going on or if it was wrong.

Well, I’m here to tell you exactly what’s going on…and it’s not only wrong…it’s evil.

We will all pay the price for a consolidation of power in so few hands.

Mark my words.

About Author

Rob K. Blake, a 15 year veteran of the mortgage industry, is a renowned public speaker, author, and former radio talk show host. His blog,, is dedicated to educating mortgage consumers, mortgage providers, and investors about both mortgage and housing markets.


  1. Just when you think you’ve heard the worst of it! It seems as though the nations industry leaders employ a team of trained monkey’s who’s job is to sit around a big expensive table just thinking of ways they can make a profit on the backs of the economy.

  2. Nov 27- 2008
    At a party filled with highly educated people who love to talk politics I asked the question if anyone else was disturbed by the actions of Henry Paulson. I stated that the TARP money is no longer being used to buy troubled assets from banks.

    My question was met scorn. Everyone looked at me as if I was some conspiracy lunatic. Yet, these people are liberals. They then quickly changed the subject. I believe they actually reacted that way because they have no idea what I am actually talking about.

    I kept my mouth shut because I have only a high school diploma and these friends have been to Yale so what do I know?

    I find all of this frightening.

    My point is even the most well read and educated in our society have no idea what is happening. I believe this is because 99% of the American public does not have the time to pay attention to these details. No one is focusing on what is happening.

    I believe TARP is a frightening consolidation of power in the hands of a few. If Mr. Paulson decides which banks fail and which banks survive, and which banks merge then we have a majority of the worlds financing in the hands of a few select decision makers. I believe eventually they will have a tremendous amount of control on every business and even public institution in the United States because if a select few control the flow of money we no longer have a free market.

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