October 24, 2008

Lend, damn you!

DealBook is reporting that some banks are planning not to spend some of the bailout money they are getting from the Fed via equity swap.

"It doesn't matter how much Hank Paulson gives us," an influential senior official at a big bank that received money from the government told Mr. Sorkin. "No one is going to lend a nickel until the economy turns."

This is precisely why commercial banks suck. First off, they lend with no safety net and lever themselves up irresponsibly. THEN, when the shit hits the fan and they get some help to stabilize the economy, they decide to leave their book frozen. The bigger problem for the banks is that sitting on that cash is doing nothing for their profit and loss since they don't make money sitting in cash. In fact, it's probably costing them. Which means eventually they will be forced to start lending again.

If they don't, then Treasury needs to nationalize, wipe out the shareholders and terminate everyone above branch VP for cause with no severance. Banks exist only by the grace of the government which charters them to further commerce for the benefit of the people of this country. If they won't do that, then there is simply no reason for them to exist in their present form. Know what I mean?


Posted by mcblogger at October 24, 2008 12:15 PM

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