The public was told that the [first wave of government bailout] money would be used to loosen the frozen credit markets and thus help revive the economy. But... there were bankers with other ideas. John C. Hope III, the chairman of the Whitney National Bank in New Orleans, in an address to Wall Street fat cats gathered at the Palm Beach Ritz-Carlton, said:
“Make more loans? We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”
How’s that for arrogance and contempt for the public interest? Mr. Hope’s bank received $300 million in taxpayer bailout money.
Herbert refers to this article by Mike McIntire:
[Treasury Secretary Henry Paulson Jr.] said in October that banks should "deploy, not hoard" the [bailout] money to build confidence and increase lending. He added: "We expect all participating banks to continue to strengthen their efforts to help struggling homeowners who can afford their homes avoid foreclosure."
But a congressional oversight panel reported on Jan. 9 that it found no evidence the bailout program had been used to prevent foreclosures, raising questions about whether the Treasury has complied with the law's requirement that it develop a "plan that seeks to maximize assistance for homeowners."
...For [John C.] Hope, the Whitney National Bank chairman, "the main motivation for TARP" was not more loans, but rather to safeguard against the "possibility things could get a lot worse." He said Whitney would continue making loans "that we would have made with or without TARP."
"We see TARP as an insurance policy," he said. "That when all this stuff is finally over, no matter how bad it gets, we're going to be one of the remaining banks."
How nice that the American taxpayer could "insure" Whitney's survival throughout "all this stuff". (I guess "this stuff" refers to the job losses and foreclosures associated with the current recession, which was caused in part by banks making imprudent loans during a housing/credit mania.) And how nice that Whitney's rock solid business model won't be changed to "accomodate the needs of the public sector". (Whitney's profits are down 85% this year due in part to its "portfolio of real estate loans in Florida, where property values have undergone a spectacular collapse".) What if everyone who banked at Whitney adopted chairman Hope's basic attitude, and decided that self-preservation took precedence over "the needs of the banking sector"? Would accounts be emptied and credit lines maxed out (and unpaid) "until all this stuff is finally over"? These are tough times, and accountholders need an "insurance policy" to make it through. Right?
Labels: Cons, Dismal Science, Housing, Insurance, Markets
