Posted on 10/21/2008 9:04:23 AM PDT by BGHater
In a step that could accelerate a shakeout of the nation’s banks, the Treasury Department hopes to spur a new round of mergers by steering some of the money in its $250 billion rescue package to banks that are willing to buy weaker rivals, according to government officials.
As the Treasury embarks on its unprecedented recapitalization, it is becoming clear that the government wants not only to stabilize the industry, but also to reshape it. Two senior officials said the selection criteria would include banks that need more capital to finance acquisitions.
“Treasury doesn’t want to prop up weak banks,” said an official who spoke on condition of anonymity, because of the sensitivity of the matter. “One purpose of this plan is to drive consolidation.”
With bankers traumatized by the credit crisis and the loss of investor confidence, officials said, there are plenty of banks open to selling themselves. The hurdle is a lack of well-capitalized buyers.
Stable national players like Bank of America, JPMorgan Chase, and Wells Fargo are already digesting acquisitions. A second group of so-called super-regional banks are well positioned to take over their competitors, officials said, but have been reluctant to undertake or unable to complete deals.
By offering capital at a favorable rate, the government may encourage them to expand. In this category, industry analysts point to regional leaders, like KeyCorp of Cleveland; Fifth Third Bancorp of Cincinnati; BB&T of Winston-Salem, N.C.; and SunTrust Banks of Atlanta.
With $125 billion left over after investing in the nine largest banks, the Treasury secretary, Henry M. Paulson Jr., said there was enough capital to invest in every qualified bank.
(Excerpt) Read more at nytimes.com ...
Changes the situation to ‘REALLY too big to fail’!
I hate Crony Capitalism!
This is pure insanity.
Seems like we’re encouraging small businesses to grow so they can be eaten by big ones.
Guppy economics.
There will probably be a record formation of new banks as this occurs. Banks are easy to put together. You lose money for the first two years and in the third year you’re golden.
Worse, Paulson’s crying that the banks not just hoard the money is a symptom of the disease of self-regulation, meaning no regulation, which he profited from while at Goldman Sachs.
That Paulson and his cronies and fellow-thinkers are handling the awards and bonuses is utterly insane. Historically an opposition party might scream about this but the Democrats are just as much the party of Wall Street as the Republicans. Especially with the financial institutions.
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