Government favors bank takeovers
Half of the $250 billion rescue package has already been invested into banks, and there are reports the other half will be used to help banks buy their weaker rivals. Dan Grech looks into the move.
A Wells Fargo bank branch in San Francisco (Justin Sullivan/Getty Images)
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Renita Jablonski: Remember last week when the government offered to inject money directly into some of the country's bigger banks? Well, half of that $250 billion rescue package has been invested. This morning, there are reports the other half will be used to help strong banks buy their weaker rivals. The question is, should taxpayers be footing the bill for bank consolidation? Marketplace's Dan Grech reports.
Dan Grech: The government's been trying to fortify banks to get them lending again. Like their big brethren, regional banks will soon apply to receive direct investments from Uncle Sam. And the New York Times reports the Treasury will favor those banks that are willing to takeover weaker rivals.
Bert Ely: Well, as some people would say, it has bad optics.
That's banking consultant Bert Ely. He agrees that weak banks need to be acquired before they fail. But if they're bought using taxpayer dollars, that would undermine the purpose of the rescue package.
Ely: Cash acquisitions will cause that capital to flow right back out of the industry. And I think that that is totally unproductive. It certainly runs contrary to the public interest.
Strong super-regional banks such as BB&T, Fifth Third Bancorp and SunTrust Banks are likely to apply for the Treasury funds. Democrats have argued that the money would be better used to help homeowners avoid foreclosure.
I'm Dan Grech for Marketplace.
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From Milan, OH, 10/21/2008
Good luck! How do you create a policy that insures that strong super-regional banks or individual howeowers will use Treasury funds in a manner that will help the economy of the country rather than help their own individual interests? I guess I would go for the strong super-regional banks and hope funding their interests will be better for the economy.
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