On Tuesday, Mr. Bernanke publicly made the case that one of the most unpopular and most scorned programs in Washington — the $700 billion bailout program — needs to pour hundreds of billions more into the very banks and financial institutions that already received federal money and caused much of the credit crisis in the first place.
The most glaring example that the banking system needs even more help is Citigroup. Though it already has received $45 billion from the Treasury, it is in such dire straits that it is breaking itself into parts.
Like many banks, Citi is finding that its finances keep deteriorating as the economy continues to weaken.
What are they doing with all this cash? Data compiled by the St Louis Fed indicates that they, the banks, already have a shipload of taxpayers money;
By all accounts money has been streaming out of Washington in an unregulated fashion, benefitting the good bad and the ugly but not the owner of these funds, thetaxpayer;
The bad bets made by executives at Independent Bank of Michigan are on display in spots across the state: a defunct bowling alley, a new but never occupied shopping center and the luxurious Whispering Woods Estates, which offers prime lots for never-constructed dream homes.
...But Independent, hard put to find good borrowers in a suffering economy, and fearful of making the kind of mistakes that got it into trouble in the first place, is not doing much lending these days. So far it is using all of the government’s money to shore up its own weak finances by repaying short-term loans from the Federal Reserve. “It is like if you are in an airplane and the oxygen mask comes down,” said Stefanie Kimball, the bank’s chief lending officer. “First thing you do is put your own mask on, stabilize yourself.”
This is not what the Treasury Department had in mind when it started this program, saying it would give the nation’s “healthy banks” enough money to start lending again, so that people could buy homes and businesses could invest and create jobs, thereby invigorating a disintegrating economy.
....of all the banks that received bailout money as of Jan. 6, it (Independent ) had the second-highest ratio of bad loans, when compared with its capital and its cushion of reserves in case of further loan losses. Its assets are shrinking and it lost money in the third quarter. It began cutting its dividend last year, when it stood at 21 cents a share. It is now a penny a share. And it had lost millions of dollars from bad stock market investments.
But Independent is hardly a high roller plagued by gold-plated executive perks, and it was not a big subprime lender, as many banks were.
