"Wizard of Woodstock" wrote in message
...


Let's not confuse two issues.

A majority of the "big" investment banks didn't want TARP funds as it
eventually morphed. What they wanted was help with the toxic assets
they had on their books - admittedly their own fault, I'm not arguing
that point. But they didn't need capital - what they needed was for
the government, much like the Resolution Trust fund, to buy up the bad
assets, repackage the more performing assets as securities and sell
them, then hold the bad assets for a while until the economy recovered
when those would be securitized and marketed. What that would have
done is bring the capital to debt to deposit ratios back in line and
with a restructuring of debt lending standards, but everything back on
track.

Which by the way, was the way it was sold to Congress in the first
place.

Paulson changed the rules because he became convinced that more
lending was needed - not a contraction of lending, but more lending
which, as much as I like Paulson's performance up to this point, was
the dumbest thing EVAH!!!

AIG is not a "bank", but an insurance, reinsurance and investment fund
and was in trouble because of it's insurance and reinsurance took
huge hits in the mortgage default (PMI) industry. However, it was
still solvent in the sense that it had the capital to back it up, but
it lost investor confidence and took a huge hit from hedge funds short
selling it's stock. There wasn't time for a Chapter 11 bankruptcy and
the only other option was Chapter 7 so the Feds stepped in - again -
and offered an easy out.

As much as I hate to admit it, Paulson and Bernacke screwed the pooch
on this one and the rest just steamrolled.



Good points. I had forgotten the details of AIG. However, as the tune
changed, more and more banks lined up. Bank of America went on an
acquisition spree and accepted bailout money.
And, as I mentioned, American Express and GMAC filed the legal paperwork to
become a bank, so that they qualified for bailout money.

Eisboch