It is stunning to think that we, the taxpayers, will spend $345 billion to “save” Citigroup. I, for one, say that
Secretary Henry Paulson and company claim that the financial system “must be saved”. They advocate pouring hundreds of billions taxpayers’ dollars into large banks and failed institutions like Citigroup, yet refuse to send $25 billion to help the automakers. They argue against helping the
The bailout plan was supposed to help Americans get back to work. Capital was to be invested into institutions to free up credit in order for banks to resume lending to businesses and real estate to jump start the stalled economy. This plan is not working. Banks are not lending and jobs are being lost. Where we need to be investing is in companies that provide good pay and benefits such as manufacturing, construction, technology and green energy and away from Wall Street. By comparison, Citigroup employs some 300,000 people worldwide, while the automakers employ over 3 million people in the
The credit crisis stems from the actions of greedy and unscrupulous bankers who pushed financial derivatives to make tons of cash. When the cash spigot was turned off, the Wall Street banks coerced the government to get a $700 billion bailout. The bank bailout was designed to unfreeze the credit markets, expand lending and start the economy moving. It turns out these banks took the government money to bolster their balance sheets, make acquisitions and pay executive bonuses instead of lending.
To make matters worse, banks further tightened credit. Recently, Bank of America decided to tighten credit and lower credit lines for borrowers in good standing. I was told by a Bank of America representative that their policy of cutting off credit to credit worthy borrowers was part of the bank’s measures to protect its interests.
I wondered why Bank of America, an institution in need of a taxpayer bailout, would pay its CEO Kenneth D. Lewis nearly $25 million in 2007. Clearly Mr. Lewis’ compensation was not based upon performance. January 2007, the stock price was $53.33. January 2008, the stock price was $40.63. As of Friday, November 21, 2008 the stock price was $11.47. This represents an 80% loss in value.
Bank of America used the government bailout to pocket $10 billion, buy Merrill Lynch and pay bonuses to their executives yet they refuse to extend credit as they had agreed. It is actions like these that are prolonging credit crisis. Bank of America should return the taxpayer money, have Mr. Lewis step down and return any compensation he has received.