Thursday, October 30, 2008

Did the Treasury Pay Banks Twice as Much as Securities were Worth in the Federal Bail Out?

How come no one ever stopped to ask whether the billions the government is paying to banks to bail them out "for the sake of Main Street" was more or less than what the market would bear? William Greider found someone who did and the news, if true, is horrifying for taxpayers:
The swindle of American taxpayers is proceeding more or less in broad daylight, as the unwitting voters are preoccupied with the national election. Treasury Secretary Hank Paulson agreed to invest $125 billion in the nine largest banks, including $10 billion for Goldman Sachs, his old firm. But, if you look more closely at Paulson's transaction, the taxpayers were taken for a ride--a very expensive ride. They paid $125 billion for bank stock that a private investor could purchase for $62.5 billion. That means half of the public's money was a straight-out gift to Wall Street, for which taxpayers got nothing in return.
The fact that the Treasury's bail out crew is staffed with veteran Wall Street financiers with connections to the banks is at least the appearance of impropriety, and it signifies that they have no investment in "Main Street" whatsoever. If the government did pay more than the stocks were worth, America has been conned into a subsidize-Wall-Street scheme with hope of little return to our local communities. Let's hope that the new Congress conducts investigations into the bail out next year. November 4 is only the beginning.

HT: Carol McCullough

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