The deepening red ink underscores a crucial question about the government’s plan: Will lenders deploy their new-found capital quickly, as the Treasury hopes, and unlock the flow of credit through the economy? Or will they hoard the money to protect themselves?
John A. Thain, the chief executive of Merrill Lynch, said on Thursday that banks were unlikely to act swiftly. Executives at other banks privately expressed a similar view.
“We will have the opportunity to redeploy that,” Mr. Thain said of the new capital on a telephone call with analysts. “But at least for the next quarter, it’s just going to be a cushion."
[From Banks Are Likely to Hold Tight to Bailout Money - NYTimes.com]
I don't know, Bunky. This is starting to look like one huge giveaway to me, a big wet goodbye kiss from the Bushies to their Wall Street buddies. Paulson is dumping money into these banks to "free up credit" with no requirement that the banks actually use this money to make loans or, for that matter, do much of anything at all - the government gets no voting rights for its so-called investment in equity.
And by the end of January all those guys will have nice fat jobs at the very banks they're dumping loot on today.
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