Dark Skinny

This extract was taken from the WSJ, an analysis from Seeking Alpha, in a surprisingly open piece, which seems to justify all the worries we all have concerning the nature of the US TARP $700 billion Bailout. While certain people blandly heave a sigh of relief at the supposed purpose of the bailout, certain other darker aspects of US banking behaviour have become very evident. This was bound to bubble and slither to the surface of this lumpy financial soup. The apparent greedy and fraudulent behaviour of the US banks is hardly surprising.  Predictably, this is purely about survival - almost Darwinian in fact - this is about earning buckets of money quickly and easily,  responsibility to shareholders, and about ‘winning’. I suppose we shouldn’t be surprised at the distrust, I guess we can all just sigh and  yawningly dismiss  it as just business as usual after all…

From Seeking Alpha:

The Wall Street Journal published something on its Real Time Economics Blog that we found to be extremely disturbing. Call us naive, but somehow we can’t help but feel that things are far worse than imagined after reading it.

Secretary Paulson clashed with members of the House Financial Services Committee during his testimony on Tuesday morning. He’s against using TARP funds to purchase troubled mortgage assets from the banks and Representatives are, somewhat justifiably, feeling as if Mr. Paulson is not following through on the intent of the legislation.

But that isn’t what’s troubling us because we believe Mr. Paulson is acting with the best intentions at heart and we also believe that members of Congress who voted for the TARP in good faith (and went to great pains to convince others to do so) are justified in grilling the Secretary pretty hard on why tactics appeared to have changed in mid-stream.

The problem lies with the reason Mr. Paulson is reluctant to use the funds in this manner, which he of course did not allude to during his testimony.

According to the WSJ:

Within the Treasury there’s a view that if the government is going to cover half the loss, banks will modify the terms of a loan for weak borrowers they know can’t make their payments, then foreclose and get the government to make up half the loss.

In other words, the Treasury feels that the reason it can’t use the funds in the manner Congress intended is because it believes the banks would act in an unscrupulous manner in order to subvert the intentions of the United States government at a time when the economy is facing its worst crisis since the Great Depression?

If the WSJ is correct this really is a terrible indictment on our society and out of all the things which have gone wrong since the crisis started in the summer of 2007, this has to rank as one of the worst. Is there no end to the greed?