$700 Billion In Taxpayer Dollars To Kill Small Banks
"Like a thief in the night, it cuts like a knife"
-Marty Brown
I was opposed to the Wall Street bailout from day one.
We were asked to trust the Bush administration, with no track record for truthfulness, to send $700 billion to Wall Street, not Main Street.
Bush, Paulsen and Wall Street want to stick it to Main Street even further.
It appears that the $700 billion will be used for Wall Street banks to take over small banks, in small towns.
Like the one I live in.
The bailout supporters made two arguments. The $700 billion was supposed to stop a financial meltdown. After we bailed out Wall Street, it was supposed to open a floodgate of credit for Main Street.
It didn't come down that way.
The meltdown continued, even after the bailout.
I'm waiting for that cash flow to come roaring into small towns. Like mine. It hasn't happened and, according to a stunning New York Times column by Joe Nocera, the money is not coming soon.
The $700 billion may never see Main Street. Unless you count Wall Street banks gobbling up Main Street banks.
Unlike other countries, such as England, the United States did not REQUIRE that banks taking government bailout money lend it out! Lending is not required, just "encouraged." The banks can do what they want with it.
If I was a running a bank, my primary "encouragement" is to make money for my shareholders. If I can take government money and use it for something more profitable, I am going to do it.
Like any businessperson would.
The most profitable thing banks can do is take government money and buy up another bank. We saw it happen last week and will see it happen many more times.
It's what Bush and Paulsen wanted all along. They snuck a provision in the bailout bill that gave BILLIONS in tax breaks for big banks to buy other banks.
Bush and Paulsen want to reshape the banking industry to allow only big Wall Street banks to survive. A tax expert, quoted by Nocera, said "It couldn't be clearer if they had taken out an ad."
Nocera, who supported the bailout bill, said that the rationale that the bailout would make banks start lending again, is "Treasury's version of the weapons of mass destruction."
I feel duped. I feel deceived. I want to vote against a congressman who supported the bailout, but my congressman saw the bailout's flaws and voted "no."
I like small banks. They are an important part of my business and my life.
Starting in high school, I've always had a personal relationship with my banker. A small town bank put me in business and another kept me in business. I want to know that the person I'm talking to is a final decision maker. I don't want a committee or a computer in New York to decide for them.
The gang on Wall Street has lost trillions and put the nation in economic peril. I don't want to do my banking with them.
I'll take my chances with a banker who knows me, knows my business and knows my family. It's worked so far. I suspect if you surveyed other Main Street business people (I am actually three doors from Main Street, but close enough), most would feel the same way.
Small town banks have not been hurt as badly as Wall Street banks. Most were not playing the sub-prime game. None of their officers get million dollars bonuses. And I am sure the officers don't get tens of millions to leave when they lose their stockholders' money.
In other words, they are personally responsible for the lending decisions they make. Unlike the people on Wall Street, they can't screw up and expect a golden parachute at the end.
I trust the small bank business model more than I trust what they are doing on Wall Street. I don't want Wall Street taking over small town banks. I don't want them to use taxpayer money to take the bank and I especially don't want the Wall Street banks to get billions in tax credits to do it.
I want them to lend money to people on Main Street. Someone told me that was what the $700 billion was all about.
People say we can fix it when we get a new President and new Treasury Secretary. That is three months. By then dozens of mergers and takeovers will have taken place.
We need to act now.
Once you allow a bank to be gobble up other banks, just like when you invade a country, it is almost impossible to undo the damage.
Especially when that damage was based on misleading information.
Don McNay is the Chairman of McNay Settlement Group in Richmond, Ky. and the author of Son of a Son of a Gambler: Winners, Losers and What to Do When you Win the Lottery. You can write to him at don@donmcnay.com or read other things he has written at www.donmcnay.com
Follow Don McNay on Twitter: www.twitter.com/Donmcnay
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Why isn't PE Obama speaking about this in his daily addresses? The news media will never touch this. Why are these huge banks allowed to become monopolies using our money right in front of us. And as for democracy, we all wrote and called our representatives and told them 99 to 1 that we didn't want them to do the bailout, but they did it anyway. Wouldn't want any of that pesky socialism, no....
Great Column. I am enjoying all the writing by Don McNay! Keep up the good work, Don.
I'm so upset about this, I don't know what to do. We need to call our congress people like we did when the stock market crashed.
I work for a medium sized commercial bank on the west coast... and our executives mentioned that these banks got a GREAT deal and are now buying up our competition and other west coast banks... great, bigger competitors!...
oh yeah, forgot. Put some $$$ into your local credit unions, they're your neighbors, not giant corps.
Anyone catch NPR's report on how this sub-prime scandal is strikingly reminescent of the Texas savings & loans scandals/bailouts of the '80's? Anobody remember one of the players in those savings & loans days?--You guessed it. George W. Bush had a bank daddy gave him, and lost all of his client's money. I guess he brought the lessons not learned straight in to the White House to form policy. He also lost money on a baseball team. He never really ran anything correctly did he? Maybe the State of Texas didn't fall apart, but heck they had a medlesome legislature that wouldn't let him practice the same economic policy he used in business.
you mean Neil Bush, George's brother.
It was the bush plan pushed by dems and repubs till THEY all got something.
You didn't expect YOU to be of the ones to benefit did you?
It's already happened here in Wyoming. After a hundred years the Bank of Jackson is now Wells Fargo. With less competition, banks will offer less and less service.
Excellent points, Mr McNay. What is now being done with the bailout billions is nothing short of robbery of the American public!
Wm Greider has an article explaining some of this crookery:
http://www.thenation.com/doc/20081110/greider2
Pretty shocking.
Most of us can join Credit Unions. Deposits are guaranteed, and services tend to be locally oriented and administered. Fees tend to be lower, and services competitive. In short, most of the money we put there, stays there. Like locally owned banks used to be.
I was a commercial banking customer until nearly 15 years ago, after my bank had changed ownership four times in six years. Fees up, ... hours down, ... no one knew me and and no one cared.
The abomination is that the money we handed Paulson and Kashkari will be used to buy up more and more banks, ... reducing competition and feeding greed. It seems to have had NO effect upon credit markets. My car is parked and my money is as well. The commercials, who were given money and a 150% increase in account guarantees continue to rob the American People at gunpoint!
Since, as Mr McNay said, it could not have been more obvious what this bailout was all about if they'd taken out an ad, one has to wonder - once again - if the Democrats, like the Republicans, are merely hand-maidens of the corporations posing as the people's representatives. At least the Republicans don't try to hide who they are: their one and only concern is transferring as much of the people's money to the corporations as they can. So it's not exactly corruption when you're totally up-front about what you're doing; only when you pretend otherwise. But, hey, not to worry: next week this time all our worries will be over. The Democrats will be in charge. And they care so gosh darn much about we the people.
I recall that the democrats provided much more support for this than the republicans. So now its the democrats that support Bush policy? Some of that $150B in pork must have been set asides for the CRA.
Spoken like a true liberal with a short memory. Nancy could not get the votes she wanted so what did she do? Sent all the little babies home. Now the Senate gets together and says how can we fix this little problem? Oh yeah, give the guys who said this was a bad bill a little pork (like millions for a wooden arrow factory) and guess what? Now it is a good bill. As a Republican who is also disappointed in Bush, this practice of blame him for everything has to end sometime.
"Some" of the money from the bailout package was disseminated last week. Most the money hasn't been given out yet. "Some" of the amount disseminated last week will be used by big banks to absorb small insolvent or near-insolvent banks. Why not address the $150b in pork that was added by congressmen to the $700b bailout? That's a heck of a lot more than the money that will be used to absord some small banks.
And 70 billion is going to bonuses for execs. of the failed banks ! We need to tell our Reps. to change that.
$70 billion is not going to executives of failed banks, not even close.
In the comic strip, "Candorville," Lamont often uses his "MassaCard" issued by the "FeudalBank" as the punchline of the day. We will see, much like the Lord of the Rings' one ring, one card, one bank, one party, to rule them all. Call it the MassaCard.
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