Tuesday, December 23, 2008

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Financial: Best Intentions, Bailout Failure

by Reb Akiva at Mystical Paths

When a house is on fire, you throw water on it. When a bank is on fire, you throw money at it.

$700 Billion Dollars (that's $700,000,000,000.00), equivalent to $2,800 for every man, woman and child in the United States, was dolled out at emergency speed to the US banking system. No demands, no promises, no commitments, just "take the money and save yourselves".

The expectations were the banks would take the money and immediately loan it out, thereby offsetting the slowdown and saving the US from a depression. First research reports are out and SHOCKA, that's not what happened...

(CNN) Bank of America received $15 billion as part of the federal Troubled Assets Relief Program (TARP). Where the money went is not clear.

"We are using the TARP funds to build our capital and make every good loan that we can," Bank of America said. The bank said it expects to release more information in its fourth quarter earning report.


Translation: Thanks for the free money, we deposited it. Now when bad loans roll in, we've got your free money to cover them with. But we're not silly enough to make the same kind of bad loans again! If you walk in with 30% down and a AAA 800+ credit rating and a verifiable salary over $100,000, we'll think about loaning you some money at a very high rate to cover the risk.

Don't worry, your government has it completely under control.
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