Posted by: Dirk | November 18, 2008

The bail-out hearing

I have read an interview with Naomi Klein this morning about the question how the $700 bn of the bail-out are used in the US. Apparently, the British got the better deal:

I mean, let’s remember, Gordon Brown got voting rights at the banks that they bailed out, seats on the boards, 12 percent dividends for UK taxpayers, as opposed to the five percent negotiated in the US and no voting rights and no seats on the board. Other thing Gordon Brown did is he got it in writing that the banks had to start lending, as opposed to Henry Paulson, who didn’t get it in writing, and the banks are not lending.

The hearing is live at Economix blog. Here is an excerpt, you be the judge and tell me whether these two latest entries reveal a consistent or inconsistent economic policy:

11:34 a.m. | Helping the healthy: Melvin L. Watt, a Democrat from North Carolina, asks, “How does putting money in a bank that didn’t ask for it stabilize the financial system?” Secretary Paulson replies that banks are “not going to raise their hands” and say they need capital. He says they claim they do not need help, and then they hunker down and stop “deal[ing] with other banks” and freeze lending. He says Treasury decided to go to “healthy banks before they became unhealthy” to make sure they would continue lending.

11:17 a.m. | Bank acquisitions: Steven LaTourette, a Republican from Ohio, complains that banks are using TARP funds to purchase other institutions “for free.” He also wants to know why National City Bank was not bailed out. (The bank was purchased by PNC, a recipient of bailout funds, at a significant discount.)

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