[brorialsibers]

Four large holding companies — JP Morgan, Citigroup, Bank of America and Wells Fargo — initially received a total of $90 billion in TARP money in the fall, but by the end of 2008 they had contributed less than $15 billion in equity capital to their subsidiary banks. Pretty disgusting. That's my money, dammit.

[cheapphenonline]

Pretty disgusting. That's my money, dammit.

Actually, it's China's money. But thanks for being outraged on China's behalf.

[seodiary]

MANY Americans are angry at banks for taking bailout money while still cutting back on lending. But the government is also to blame. For reasons that remain unclear, the Troubled Asset Relief Program has channeled aid to bank holding companies rather than banks. It actually makes sense. The way banks are structured in the US, each bank has to be localized to one state. So a Bank of America in Pennsylvania is technically owned by a different company from a Bank of America in Virginia. What they share is a national brand/holding company. It's a stupid rule and I don't remember why we have it.

[SoorgoBardy]

It actually makes sense. The way banks are structured in the US, each bank has to be localized to one state. So a Bank of America in Pennsylvania is technically owned by a different company from a Bank of America in Virginia. What they share is a national brand/holding company. It's a stupid rule and I don't remember why we have it.

We have it because it was one of the lynchpins preventing a national bank collapse (see, 1930). Sadly, we have been relaxing that rule further and further, and that relaxing was one of the factors leading up to the current situation.

The idea was that banks should not be national banks, because then a single bank collapsing can cause the whole national banking system to collapse out of fear. If we had state-based banks, we wouldn't have needed all this federal bailout money, because no bank would have been too big to let fail...

Too bad the current generation doesn't believe in learning from the mistakes of the past, and instead prefers to make them for themselves.

[fuesquemill]

Maybe - but in any case the US government should have insisted that the money was actually channeled to the actual banks, and not used for unrelated investments...

Possibly the Bush administration was using the "private business always knows best, their actions motivated by greed are always the solution, and any government actions are always the problem. So let us try to give money to private corporations with no strings attached, and everything will be solved" ideology.

How about "why figure out how to spread it among 50 different banks when they can figure that out better than we can" and "they're a bank in trouble, what else are they going to spend it on".

[ffflyer]

I'm not going to blame the administration for doing what seems like the obvious sensible thing to me. Since you (Thue) didn't even know the way these holding companies worked...

[BrifsGefel]

IIUC (perhaps not well), the ones holding the toxic paper were the holding companies. As such, putting equity into the holding companies stabilized the holding companies.

Pushing the equity down to the banks is important only if you thought that the purpose of the equity injections was to increase lending. I don't recall that Bush ever said that was a purpose of the injections. It's convenient politically to set Bush up as the straw man, as the NYT commentator has done.

Unfortunately, we are worse credits now than we were a year ago. We could lose our jobs at a much higher rate than a year ago. We aren't getting raises at the rate we were a year ago. Our real estate is more underwater than a year ago. Asking a bank to increase lending under such circumstances seems odd. Besides, we shouldn't be borrowing more. We should be borrowing less. The economy needs to adjust.

[lammaredder]

Then would it not have been better for the government to sieze them or set up its own bank if it wants to control the lending decisions of the banks?

Yes.

I still wonder why people are surprised that a government that operates in the interests of the capitalist ruling class is handing over hundreds of billions of dollars to the capitalist class, no questions asked. It's like you actually believe this is a government of the people, by the people, and for the people.

[Misespimb]

The article is asking for directed loans to the banks on the assumption that the goal is more consumer/business lending. The collapse is not due to that lending directly but to the creation of toxic assets based on that lending (especially mortgages). The total value of capital in circulation rose by $70 trillion in about 10 years. The collapse has liquidated about $30 trillion so far. As more of this goes up in smoke, the Feds wish to prevent the failure of any institutions "to big to fail." Allowing these institutions to grow in the first place was what was stupid. The FDIC payments or a minor injection of capital can assist the local economy when a limited bank fails. These big guys are too top heavy for that to work.

[regfortruegoo]

but that'd be teh SOCIALISM OMFG!!!!11one