What happened to pre-conditions? How can you give banks tax payer money and HOPE they will "do right"?
Several major U.S. banks are leaning toward spending a portion of their federal rescue money on acquiring other financial firms rather than for issuing new loans, the primary purpose of the government's $250 billion initiative to invest in banks.
J.P. Morgan Chase, BB&T, and Zions Bancorporation have all said in recent days that they are considering using some of their federal money to buy other banks.
About 10 financial institutions belonging to the Financial Services Roundtable, which represents 100 of the nation's largest financial services firms, are also considering making acquisitions with the money, said Scott Talbott, the group's senior vice president.
Check out this paragraph:
There is a growing consensus among Treasury and other federal officials that allowing healthy banks to use the money to acquire banks in jeopardy of failing could stabilize the economy and bolster confidence in banks. This could also save money for the Federal Deposit Insurance Corp.
Aren't these the same banks that over-leavaged themselves? And you are going to trust them to do non-stupid things?
Remember when I wrote that I pooped my pants? Well, it happened, again, after reading this:
The Fed will make up to $540 billion available to buy assets from money-market mutual funds -- in which pension funds, university endowments and millions of Americans stash money -- if they need it. The measure is intended to keep the funds from experiencing cash crunches.
Money-market mutual funds invest by lending money on a short-term basis to companies, banks and other financial institutions, as well as the government. They are normally considered safe places to park cash because they buy only debt that is highly likely to be paid back.
But from early September to mid-October, nervous investors pulled about $480 billon out of a particular class of money-market funds. If that run on the funds had continued, it could have forced them to sell assets into an already troubled market, potentially causing a cascading series of losses to investors, more fund redemptions, more forced selling and further losses.
Again, if a "redemption rush" means the funds can go under, what happens when a sustained redemption rush occurs when the baby boomers retire and take money out of their 401(k), 403(b), etc?
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