Banks Repaying Bailout Funds Face 'National Interest' Test

Banks Repaying Bailout Funds Face ‘National Interest’ Test

Politics • April 2009 • Views: 554

/We’re about to find out for sure where Obama’s intentions truly lie.

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4 comments

Zimriel Apr 20, 2009 12:06:33am

I heard about this. It’s also in the Financial Times.

As background, here is Larry Summers, passive-aggressively hinting that he, personally, would prefer to let the banks pay it back:

On Sunday, Lawrence Summers, President Barack Obama’s top economic adviser, told NBC’s Meet the Press that repayments could eventually help the government provide further resources to help the sector. Such a move could also allow healthier institutions to differentiate themselves from weaker banks and free them from constraints on executive pay, and other activities, that come with bail-out money.

Now, here’s the minion walking back what Summers said. Note where the “BUT” kicks in -

The official, meanwhile, said banks that had plenty of capital and had demonstrated an ability to raise fresh capital from the market should in principle be able to repay government funds. <u>But</u> the judgment would be made in the context of the wider economic interest. He said the government had three basic tests. It needed first to “make sure the system is stable”. Second, to not create “incentives for more deleveraging which would deepen the recession”. Third, to make sure the system had enough capital to “provide credit to support the recovery”.

Needless to say, I don’t trust The One; he’s using this “unstable” system to keep control of the reins.

Mr. Sandman Apr 20, 2009 1:16:34am

Uh, has either of you looked at and understood what is meant by the “three conditions” in this context to accept “pay back?” Seriously, actually think about whether this makes sense in any way, before just reflexively going “duurn, he wants totalitarian Marxo-communism.” Seriously, try to see it from a reasonable point of view. For instance, the condition that the funds being raised to make the payback is not being pulled from more deleveraging—one of the major banking schemes/swindles which led to this collapse— is not only fair but if not imposed could really mean more economic damage if banks start trying to “pay back” the funds by—for all intents and purposes—gaming the system to “make money” out of nothing—which like I said is one of the major factors leading to the economic crisis in the first place. Personally, I think in general that the administration is doing far too little to manage the economic crisis in a way that favors the “national interest” over the interest of rich bankers and the like. Why do you want so much for the bankers’ interests to be prioritized over the public interest— I really don’t get this logic.

Zimriel Apr 20, 2009 1:52:31am

re: #2 Mr. Sandman

Why do you want so much for the bankers’ interests to be prioritized over the public interest— I really don’t get this logic.

First, thank you for your considered explanation of ‘to not create “incentives for more deleveraging which would deepen the recession”.’

But that still leaves my point, which was that “make sure the system is stable” is open-ended, and that I don’t trust the Obama administration to decide that on objective terms. This is the administration which is trying to shoehorn all manner of healthcare and welfare reforms at the same time as it’s working with the economy. That points to an unseriousness about “system stability”.

Also, “rich bankers” is an emotive term. It’s a class warfare term (why else point out their wealth?). And “national interest” is open-ended too: I suppose you, Mr. Sandman, know exactly what is in the national interest? I suppose you, Mr. Sandman, know how best to allocate funds from the evil “rich” class over there to the patriotic masses?

jamgarr Apr 20, 2009 7:30:39am

Whatever the rules (or restrictions) on payback that existed at the time they took the money should rule. This making-it-up-as-we-go stuff needs to stop.

/Who is John Galt?

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