15 Oct 2008

New Capitalism

Forbes calls it “Bailout II,” the Treasury Department’s “injection” of capital into selected banks, thus “following in the footsteps of European governments in an effort to restore confidence to the ailing financial system.” Later today, Bush, Paulson, Fed boss Bernanke, Federal Deposit Insurance Corp. chairman Sheila Bair, and “other economic officials will announce details of the revised $700 billion economic rescue plan,” according to Forbes.

But here’s what Forbes does not tell you: half of the money will end up in banks that don’t actually need to be “rescued.” Last month, Bush and his Wall Street cronies told us the bailout would be aimed at the mortgage market, and yet JPMorgan Chase, Bank of America, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, and others will walk away with over $125 billion and it has nothing to do with the engineered “distress” of the mortgage market. As the Hartford Courant notes, this “is part of a wider plan that goes beyond the $700 billion rescue package approved by Congress earlier this month.”

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