Thanks but no thanks
IBERIA Bank, a Louisiana company that previously accepted $90 million in government aid, says it will now give the money back. Changes to the Troubled Asset Relief Program would put the bank at a disadvantage, said Daryl Byrd, the bank’s chief executive.
Regulations
It’s true, there are a lot more rules and restrictions on banks that take bailout money now than there were under the Bush administration. So it makes sense that a bank that’s doing just fine would want to forego government aid.
But if the bank was doing just fine, what was it doing taking government aid in the first place?
“We didn’t want this”
Earlier this week I wrote about Northern Trust bank. The company threw a large, lavish party in Los Angeles after accepting more than $1 billion in federal aid. Naturally, Congress was outraged and asked the bank to return to the government the amount it spent on the party.
Northern Trust responded that it had never wanted government aid and had only gone along with the program because of politicians pushing for participation.
A strange story
So what’s going on here? A bank that took $90 million is returning it, so clearly that bank didn’t need the money. Another bank came right out and said it doesn’t need the money. So is the government really asking banks that don’t need help to take the money? And why?
If there are any readers out there who know the answer, I’d really like to know.
More questions
I understand that the money is to encourage banks to resume lending “normally.” But why would banks who were doing fine change their lending practices in the first place? And did they?
The new administration is being a lot more careful about tracking where the money goes. However, it seems that if it’s encouraging “full participation,” it’s not being very discriminant about who gets it. I am glad that the new regulations are discouraging banks that don’t need the money from taking it. But is that enough?
A lot of money is going to go down the drain as long as these banks think the money is ‘theirs’ instead of ours.
As soon as some of these banks we offered a part of the bailout money, a sense of greed crept in. You’re definitely right on this one; many of them were not in definite need of the money, but opted to take it anyway. They had no idea the government was going to track this money, which was really stupid of them to think. Now, with all of the finger-pointing and disputes over banks’ irresponsible usage of the money, many of them are trying to get completely out of the picture. To return the (taxpayers’) money would be the best move they’ll make so far.
The banks were forced by politicians, Treasury Secretary Paulson and Fed Chief Bernanke to take the funds in order to be used not to lend, but to purchase other banks that were in bad capital shape. Banks account for a small % of the lending in this country, something on the order of 20% or so. The rest comes from insurance companies, pensions, etc. So, please do not trust what the politicians say. They are the ones who created the mess and will point their fingers at whomever they can to deflect acceptance of the blame. As further evidence of their hypocracy, incompetence or obfusaction (not sure which), please note that these same politicians blame the current problem on debt, now blame the banks for not creating more debt but have just raised the nation’s debt cieling by trillions. Remember when the Democrats lambasted the Reagan/Bush/Bush administrations about the deficits in the billions, but are now ok with deficits in the trillions? What has happened to our country?
I think that all the money that was going to any bank in Louisiana that did not need the money should go directly to the taxpayers of Louisiana. They are the ones who are going to have to pay it back anyway. This would start what I call a “trickle up economy”.This I believe would really be a better way of jump starting the economy.
I have several concerns about this whole bail out issue.
1. The banks are not doing what I believe was the reason to give them the money (they are not making loans or helping people not go into fourclosure.
2. They are not giving an accdount of how they are spending the money.
3. They are purchasing other banks only to make themselves larger.
4. Even though it is Tax Payer money that is enabling them to Grow, they are still only concerned with their own big incomes and their Shareholders bottom line.
5. For All the bailout money that is given they (the banks & Wall Street follow that by ANOTHER cut in Jobs.
We will never come out of this DEPRESSION (not RECESSION) as long as jobs continue to be cut. Who will be left to purchase anything. The only ones that will have any money are the Big Boys.
I am not against lending money to them but I think that an additional requirement would be that they create NEW jobs and Discontinue laying off people. They are using TAX PAYER MONEY so for the good of the ECONOMY and the PEOPLE put it back into the ECONOMY.
Not a sermon just a Thought.
Seriously guys, think it through. NOBODY should be getting tax dollars. PERIOD! The banks, the homeowners, NOBODY!
Earl, There is no such things as “trickle up.” Poor people don’t have money to trickle up the ladder – that defies not only economic sense but physics too! The only way they would have money under the “trickle up” concept is for it to be TAKEN forcefully from one group of people and redistributed to others. Sounds kinda immoral, doesn’t it??? If the government wanted to add $1 trillion dollars to the defecit/national debt in order to stimulate the economy, then why don’t they just cut taxes and let people keep their own money? Oh, I know why they won’t do that — because then they can’t take from the rich who pay taxes and give to the poor who do not. In other words, this isn’t about stimulus, it’s about redistribution of wealth.
T.Nyland: The banks, other than the Citibanks and other types that should have been left to go under, did not ASK for the money. They were FORCED to take it. Just look at how many of them are saying, “Screw this, you can have it back…we never wanted it in the first place.” Steve Forbes has an excellent article in the Wall Street Journal today about this whole mess. You should read it.
It is correct that big banks are not the only place to get a loan. My local credit union is still loaning and offering decent interest rates. Also there is a lot of ‘in-house’ financing available from different industries such as furniture/appliance stores and car dealerships.
There hasn’t been much of a “trickle down” effect either, as real wages have fallen since the 70s and the executive to normal worker pay ratio has gone from the dozens to one to hundreds to one. The idea is that if a whole lot of money and tax breaks is given to the top of the economic pyramid, then it will some how “trickle down” to the rest of the country. It works best in a nearly deregulated economic system, but if history has taught us anything it benefits the richest first, and everybody else second, and not much at all. Think about it more like this – 95% of Americans hold about half of the wealth, the rest held by the richest 5%. The standard of living has decreased since the end of the 60s, goods and services cost more, it’s nearly impossible to get decent health care. What sounds more immoral to you? Doing things to benefit those who have benefited the most from that shift (wealthiest 5%) or doing something to benefit those that have been hurt?
If they wanted to do something with this bailout, they’d use it to take the debt record to as close to zero as possible. Reset – start over, and next time be more careful.
Peter, Populists like to point to the thieves and crooks on Wall Street who have created this big mess when they denigrate “trickle down” economics. But don’t forget that the risks they took all were made possible by guarantees on those risky assets made by the federal government. But that’s not where trickle down really happens.
Trickle down occurs when a small business man like me, who doesn’t make millions, but does ok, spends money not in additional taxes, but in purchasing additional products, services and labor in order to make my business grow as I desire. When I and my brethren in the business of business pay those dollars to the government, not only are we deprived of those dollars, so are our service providers, vendors and employees. How dare the government think they can spend my dollars better than can I!!!
As to the standard of living, inflation and health care comment…oh please! First of all, by what measure is it that indicates the standard is falling when you look at the average square feet in the average house, the number of autos, televisions, etc. in the average house from the 1960s to now? What about the technology that has improved the quality of life that exists now that didn’t exist in the 1960s (ie. microwave, DVRs, iPods, cell phones, the Internet, etc.). A few minutes of thought shatters that, unless of course you’re too busy using your rotary dial telephone.
As for health care, are you kidding? The US healthcare system is the best in the world and is generally where those from socialized medicine countries come, if they can, to receive the services they CAN’T get in their own countries that tried to do the MORAL thing. The problem with healthcare in our country is not it’s quality, it is the payment structure caused by government interference and a third party payment system that removes the end-consumer from the purchase price. And let’s not forget that prices are driven up by high medical malpractice premiums and unneeded testing caused by a litigious tort system that encourages people to sue for any misfortune. We don’t want our doctors to think they’re gods, but we expect them to be as perfect as one.
I’ve heard the OBAMA! administration may press the reset button with Russia and Cuba. Perhaps you can find morality in those systems. Good luck with that.
A SAD TALE THAT NEVER SEEMS TO END
Analysts predict that the number of nationwide foreclosures for the year 2008 alone will reach one million. Meanwhile, Credit Suisse predicted that there will be 8.1 million foreclosed properties within the four-year period from 2009 to 2012.
I owned and operated a small business in Palm Beach County, Fl for 13 years. In our best years, we employed 15 people. Things started getting slower at the company a few years ago and the economic downturn finished the job. My company is out of business and the building I purchased approximately 5 years ago (for my business) is in foreclosure. The current principal mortgage balance is $499,000. The building has been on the market for over 2 years and the only offers ever received are listed below.
I have received three cash offers to purchase the building from October 2008 to present. My bank had rejected the first two offers and the third offer has been submitted and is pending. In October 2008, we received a cash offer of $350,000. The bank rejected this offer after having the building appraised. The bank claimed to have two appraisals, one at $460,000 and the other for $480,000. I informed my real estate broker that the offer was rejected and about the appraisals. The broker found another buyer in December 2008. The buyer was made aware of the banks appraisal and made a cash offer of $460,000. During the buyers due diligence period, the buyer requested the banks appraisal for $460,000.I requested the appraisal and the bank denied my request. My attorney requested the appraisal and the bank denied that request. The bank would not release the appraisal and said it was an internal document for the banks use only. The request for the appraisal continued until the buyer cancelled the contract. A new cash offer from the same buyer in March 2009 for $370,000 was received and is pending at the bank. If the bank accepts this offer, they will have caused themselves to needlessly lose $90,000. They will certainly sue me and my wife for the shortage. If the bank rejects this offer, they will foreclose on the property and sue my wife and I for the full amount owed. Since my house is cross collateralized, they will also foreclose on my home. It isn’t acceptable for any financial institution or company to make decisions like this. They’re turning down money but still asking for tax payer money (bail out). I believe this is common practice as these financial institutions have company policies that aren’t changing with our new economy. If there are 1,000,000 foreclosures and banks turned down $90,000 each (my scenario $460,000-$370,000), that would equal $90,000,000,000.
How can we provide tax payer bail out money to companies that are so mismanaged?
They’ll be back for more money unless the economy turns around fast or they change their internal practice of loan resolution. As the man who needed a heart was heard to say to his doctor, “Get me the heart of a banker, i.e., one that has never been used.”
Hey Charlie the “Small Business Man”.. increasing taxes on those earning over $250K a year will do exactly what you claim.. if you are indeed a small business, and you have earnings over 250K, then you have an incentive to buy more services, hire more people, purchase more equipment. At the same time, by reducing taxes at the lower end puts more money in their pockets which will be spent on necessities such as food, clothing and services, which in turn increases small business earnings, which in turn increases the incentive to purchase more equipment, hire more people, etc.. and on and on. It’s really a pretty simple concept. And if history has taught us anything, it is that trickle-down (do you know when that term was first coined?? Hint: It wasn’t with Regan) taxation policies DO NOT work, have never work and continuing to try it and expecting different results is one of the first signs of mental illness.
TARP PROBLEM = (From a Real Estate Broker Perspective)
1) Banks that got TARP are using the Money to Buy Properties CASH, and BANKS are accepting these offers in spite of Higher Offers from Prospective Buyers.
2) In the PAST 2 WEEKS I have made ‘3 Purchase Offers’ that were denied because of CASH OFFERS from Banks that got BAIL-OUT MONEY (One of the Cash Offers was for 40,000 over the Purchase Price in San Bernardino, CA – The other 2 were one right after the other on the same property).
3) Current RENTERS (Perspective Homebuyers) are not ABLE to Compete with LENDER CASH OFFERS – (Therefore, they continue Renting and the BANKS GET RICHER on their TAX DOLLARS and INVESTMENTS – then resell them at a higher currency rate). Same with Wall Street.
4) BANKS should be USING THIS MONEY to MAKE LOANS to Borrowers (Perspective Homebuyers), Not buying up the market – I don’t see how this is helping the Good Credit Borrower.
5) On a $1,000.00 dollar monthly Mortgage the Bank makes about $950.00 dollar profit, Every Month On Compounded Interest calculated within 30-Year Term – BANKS SHOULD BE MAKING THEIR MONEY OFF INTEREST – NOT BUYING UP THE MARKET.
6) CREATING MONOPLIES = I have even been asked to go work for the Bank, because the Banks are EXPECTING so much MONEY that they expect to CONTROL the MARKET – Once they BUY-OUT the Market – they’ll have no need for Broker Services – (which is a disadvantage to clients). We tried this with HVCC has cost potentially $1.7 Trillion in equity – 07.10.09 = US HOUSE OF REPRESENTATIVES
7) STOP ALLOWING BANKS TO BUY PROPERTY CASH WITH TARP = BANK BAIL-OUT MONEY – (Good Prospective Credit Buyers are not able to get Loans because the money is being allocated to this source). Also if you’re a BANK you get a Tax Benefit for doing this (Another Incentive) Whereas, if you are just a Private Individual buying Cash for a property there is NO TAX INCENTIVE.
STOP THIS PRACTIVE IMMEDIATELY – BILLIONS OF DOLLARS HAVE BEEN SPENT IN CALIFORNIA JUST ON THIS – That means – ’Thousand’ of ’Prospective Homebuyers’ have not been able to compete – and it’s ALL TAX PAYERS MONEY?
PLEASE RESPOND WITH IMMEDIATE ACTION, Not to mention now that the Banks have the Money – they are Holding out on Putting their BANK OWNED PROPERTIES on the Market to Drive Up Prices —– (Supply & Demand). This could lead to another unexpected crash in the economy.