Bank of America Spends $7 Billion on Chinese Bank, Then Lays Off 30,000 Workers

[babylonsister]

http://firedoglake.com/2008/12/13/bank-of-america-spends-7-billion-on-chinese-bank-then-lays-off-30000-workers/

Bank of America Spends $7 Billion on Chinese Bank, Then Lays Off 30,000 Workers
By: Ian Welsh Saturday December 13, 2008 1:00 pm





Ah, the sweet smell of your TARP money being used to batter the US economy senseless. First Bank of America gets $15 billion of TARP funds, and issues $9 billion worth of bonds guaranteed by the FDIC, then it spends $7 billion to buy a big stake in a Chinese bank.

Now Bank of America announces it's laying off 30,000 to 35,000 workers. Why? In part because it took over Merrill Lynch and wants to "eliminate redundancies". Now, that's entirely rational for Bank of America, as is spending $7 billion to buy up shares in a bank cheap (they got a below market price). But it's not good for the US because that money was meant to be loaned to Americans and because layoffs make the economic situation worse (and those laid of workers will immediately cost the government a ton of money.)

Economic decisions which can be rational for individual companies or people can be very bad if everyone starts doing them. A large part of the government's job at this time is to make sure that as few people are getting laid off as possible, that money loaned to banks is being loaned to businesses and consumers and so on.

To put it simply, such money should be contingent on not laying off workers. It should be contingent on actually using the money to lend. If you aren't using the money to lend; if you are laying off workers, then you shouldn't get the money. This is especially the case with purchases—if a company is in good enough shape to be doing acquisitions, it's in good enough shape that it shouldn't need Federal help.

In particular, to repeat again, banks need to not be allowed to buy up other financial firms. There's perhaps little that can be done about them buying shares in a Chinese bank, but Merrill should not have been sold off for cents on the dime, and the same is true of most other firms. As long as banks know that there is a chance they'll be able to buy up other banks and prices that won't repeat again for 70 years or so, they're going to horde cash, rather than lending it. It needs to be made clear that any financial firms going bankrupt will be run by the FDIC and will not be available for purchase for some time.

Over $8 trillion now has been used in a so far unsuccessful attempt to stabilize the financial sector. The reason it has failed is that the interventions have not had strong rules attached to them about what must be done with the money given. This is exactly opposite to how government money should be used. The public has not been coughing up all this cash for the good of banks and so they can keep paying bonuses and buying each other up, it has been coughing that money up in the understanding that the money is supposed to stop the crisis and fix the economy. If the money is not doing that, then it is being wasted; indeed, worse than being wasted, it is being stolen from ordinary taxpayers to enrich the already rich.

[Idealism]

1. Not to defend Bank of America

but the Paulson plan has clauses written in of up to a $100 billion incentive fund for acquiring banks, with no condition on the health of the institution (a failing/failed bank or a perfectly solvent one).

So, they were doing what is perfectly legal, even encouraged by our great Government. Blame Paulson for this shite.

[Acadia Blue]

3. Legal but immoral, unethical, and treason to American taxpayers.

[Idealism]

4. I would say immoral

Unethical, not quite. They are trying to cut costs, unfortunately the easiest way to do that would be to just cut personnel. Its standard operating procedure in business, you learn that on day 1 of the class.

Treason to the people who bailed them out, that has some merit for sure, but again, our government told them this was acceptable.

I leave you with this nugget of wisdom:

Don't hate the player, hate the game? :D

[rhett o rick]

6. Blame Paulson? Congress bought into it. Why not blame Congress? nm

[Idealism]

11. Because to blame Congress is to admit something no one wants to...

"You get the government you deserve"

No one, certainly not the unsuspecting public, want to take the blame for voting these incompetent louts into office. Certainly not someone who was just laid off by Bank of America, you can understand their reluctance to see reason, yes?

There is plenty of blame to go around: Bush, Paulson, Congress, Wall Street, the public, etc.

[clear eye]

13. The public overwhelmingly opposed the bank bailout

And went out of their way via emails, phone calls, faxes, and even a multitude of small street protests to tell Congress so. Congress refused to delay campaign season for a few days in order to get testimony from prominent economists, which might well have produced a different sort of bailout. We Dems have a tendency to blame the majority of the electorate for everything because sometimes they are just so dumb. Like when they almost voted Bush into a second term. It's a good idea to remember that they are also often right--they've opposed the Iraq war for quite a few years now, and have wanted Bush/Cheney impeached since early 2006.

The influence of the power elite limit the pool we have to choose our elected officials from via campaign finance, control of the MSM, etc. Even so, the 2006 Democratic majority in the House was supposed to end the Iraq war, but didn't as it would have taken an impeachment of Bush/Cheney for misleading the country into war to make that happen. So I don't blame the majority of the electorate for doing the best they could with the candidates and information available to these mostly overwhelmed people.

[patrice]

2. Very very creepy! nt

[Rosa Luxemburg]

5. there should be legislation that should make banks behave themselves

nationalise all banks.

[rhett o rick]

7. The crooks own the damn legislators. nm

[L0oniX]

8. Bank of UnAmerican activities n/t

[marmar]

9. That's My Bank! .......

:puke: ....... for now anyway, but I'm moving to a credit union. To hell with all these megabank pigs.

[sam sarrha]

10. thats why they refused that company credit, put em out of business, invested BAIL OUT $$$ in China,,

[robinlynne]

12. Damn Paulson and Damn Congress both!

I'm in a fighting mood today...

[4 t 4]

14. Good thing it passed, but don't pass the Big 3 loan

could we suck more?

[clear eye]

15. That ain't nothing. The Federal Reserve has loaned $2T to financial houses

under the radar, according to Thom Hartmann on Friday. Hartmann says Bloomberg news tried to get an accounting of where that money went through multiple FOIA requests and was stonewalled.

Yes, that's $2 trillion snuck to the mega-banks, w/o strings or even a public accounting. I've been sick about what functions of government and necessary services will be lost as a result, ever since. Not too thrilled that our President-elect is going along with the subterfuge.