03-06-2009, 12:26 AM
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Member
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Join Date: Apr 2006
Location: New York
Posts: 4,459
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Quote:
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Originally Posted by motordavid
Wonder where all that TARP dough that they have received thus far, "goes", when they do a BK...nah,
they are "systemically important to the system".  |
The answer to your question can be found in this article....
http://www.nytimes.com/2009/02/18/op...harfstein.html
MANY Americans are angry at banks for taking bailout money while still cutting back on lending. But the government is also to blame. For reasons that remain unclear, the Troubled Asset Relief Program has channeled aid to bank holding companies rather than banks. The Obama administration’s new Financial Stability Plan will have more influence on bank lending if it actually directs its support to banks.
To see why, it’s important to understand the distinction between banks and bank holding companies. Banks take deposits and make loans to consumers and corporations. Bank holding companies own or control these banks. The big holding companies also own other businesses, including ones that execute trades both on their clients’ behalf and for themselves.
It would seem obvious that helping banks, not holding companies, would be the most direct way to stimulate bank lending. But when TARP purchased preferred stock and warrants, it bought them from holding companies, not their bank subsidiaries.
While TARP has been generous with bank holding companies, these companies have not been so generous with their banks. Four large holding companies — JP Morgan, Citigroup, Bank of America and Wells Fargo — initially received a total of $90 billion in TARP money in the fall, but by the end of 2008 they had contributed less than $15 billion in equity capital to their subsidiary banks.
The holding companies seem to have invested most of their TARP money in their other businesses or else retained the option to do so by keeping it in deposit accounts, even as the capital of their banks decreased. At the same time the banks, which provide the majority of loans to large corporate borrowers, drastically reduced lending to new borrowers.
Summary: the money never went to the banks, but instead went to the owners of the banks. And instead of giving the money to the banks that they own, they have put the money under their mattresses.
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my experience on X5world when I spend too much
time posting in political threads in the lounge... 
Last edited by Eric5273; 03-06-2009 at 12:42 AM.
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