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.