Remember the financial crisis, the $700B bailout, and Henry Paulson? Guess what? They're all still he-eere.
Despite the many smiling faces wherever one goes these days (for example, I went out to dinner last night, said about four syllables to my companion, and the people at the next table were all over us with post-election glee), we continue our ongoing series about the economic debacle. It doth continueth.
Latest additions to our updated OrgScope map include the government purchasing up to $250B of preferred stock in certain banks, which puts money in their coffers that they, in turn, are supposed to move back into the lending market.
The first eight banks to take advantage of the program, scooping up half the $250B, are: Bank of America, JP Morgan, Citigroup, and Well Fargo, each receiving $25B; Goldman Sachs and Morgan Stanley, each receiving $10B; Bank of New York Mellon ($3B); and State Street ($2B). According to "Devil Is in Bailout's Details," an informative article by Deborah Solomon and David Enrich in the Oct 15, 2008, Wall Street Journal, "the remainder will be available to small and medium-size institutions that apply for an investment:"
The sweeping steps create a thicket of issues, most pressingly whether the banks will step up lending. The government is making clear it expects banks to lend out the funds it gets from Uncle Sam. Further exercising its clout, Treasury also extracted a promise that the financial firms would help struggling homeowners, continue lending and would sign up for loan guarantees offered by the Federal Deposit Insurance Corp.
"What we're doing is making clear to the banks how important it is to deploy the capital," Treasury Secretary Henry Paulson said in an interview.
