[Peace-discuss] the bailout hoax - chapter 2

[E. Wayne Johnson]

 From the New York Times today----
...Treasury Secretary Henry M. Paulson Jr. had decided to use the first 
installment of the $700 billion bailout money to recapitalize banks 
instead of buying up their toxic securities, which he had then sold to 
Congress and the American people as the best and fastest way to get the 
banks to start making loans again, and help prevent this recession from 
getting much, much worse.

In point of fact, the dirty little secret of the banking industry is 
that it has no intention of using the money to make new loans. But this 
executive was the first insider who’s been indiscreet enough to say it 
within earshot of a journalist.

(He didn’t mean to, of course, but I obtained the call-in number and 
listened to a recording.)

“Twenty-five billion dollars is obviously going to help the folks who 
are struggling more than Chase,” he began. “What we do think it will 
help us do is perhaps be a little bit more active on the acquisition 
side or opportunistic side for some banks who are still struggling. And 
I would not assume that we are done on the acquisition side just because 
of the Washington Mutual and Bear Stearns mergers. I think there are 
going to be some great opportunities for us to grow in this environment, 
and I think we have an opportunity to use that $25 billion in that way 
and obviously depending on whether recession turns into depression or 
what happens in the future, you know, we have that as a backstop.”

Read that answer as many times as you want — you are not going to find a 
single word in there about making loans to help the American economy. On 
the contrary: at another point in the conference call, the same 
executive (who I’m not naming because he didn’t know I would be 
listening in) explained that “loan dollars are down significantly.” He 
added, “We would think that loan volume will continue to go down as we 
continue to tighten credit to fully reflect the high cost of pricing on 
the loan side.” In other words JPMorgan has no intention of turning on 
the lending spigot.

It is starting to appear as if one of Treasury’s key rationales for the 
recapitalization program — namely, that it will cause banks to start 
lending again — is a fig leaf, Treasury’s version of the weapons of mass 
destruction.

Read more : http://www.nytimes.com/2008/10/25/business/25nocera.html