Bank of America latest recipient of Bailout Mania
posted at 8:01 am on January 16, 2009 by Ed Morrissey
Remember when the feds arranged a hasty sale of Merrill Lynch to Bank of America in order to avoid its collapse? Now they’ve had to rescue BofA too, with $20 billion in TARP funds and a 12-digit pledge to cover their assets to keep depositors from making a run on the bank. Of course, they’re Too Big To FailTM — or at least they are now:
With a new round of turmoil gripping the financial markets, the Bush administration late Thursday night rushed $20 billion in emergency funding for Bank of America.
Just months ago, Bank of America, based in Charlotte, N.C., appeared to emerge as the nation’s top bank after it stepped in on Sept. 15 to purchase investment bank Merrill Lynch. After Merrill’s fourth-quarter results proved worse than expected, however, the acquisition was in peril and investors have fled Bank of America in droves.
Bank of America’s stock lost 40 percent of its value during the past 10 days — shares closed on Thursday in single digits for the first time in 18 years — and the taxpayer money will be used to ameliorate the losses from its acquisition of Merrill Lynch. Chief Executive Ken Lewis called it “deal of a lifetime” when it was announced.
People familiar with the unfolding events, requesting anonymity to speak freely, said Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, with the knowledge of President-elect Barack Obama’s transition team, pressured the bank to stick to its purchase of Merrill Lynch.
Uh-huh. In other words, had Paulson not forced the bank to buy up a failing business with a horrible balance sheet, BofA would have been stable and we wouldn’t be spending $20 billion to stabilize it. “Deal of a lifetime,” indeed. Everyone involved in that transaction should be fired, starting with Paulson and Bernanke, except of course that Paulson’s out of a job on Tuesday, anyway. BofA already received $25 billion in bailout money when they bought ML last year, and now they’ll get another $20 billion while they shed 35,000 jobs. What a deal for taxpayers, right?
But wait — there’s more! Since BofA apparently called Operator #5 before midnight, they get the extra bonus of what amounts to a $118 billion line of credit to help backstop their assets, primarily real-estate loans, so that investors can feel secure despite their drop in value. Where did they get those loans? They bought them when they bought Merrill Lynch. I wonder if they get a set of Sham-Wows with that …
Of course, had Paulson actually followed the plan that he begged Congress to pass last October, the TARP funds would have gone to purchasing those toxic mortgage-backed securities and would have stabilized the real-estate loan market. It might have made the entire series of bailouts unnecessary. Now it looks like Paulson will wind up doing both TARP and the bailouts but backwards, and while almost destroying other financial institutions along the way.
This is government doing what it does naturally to markets — they screw them up. One would have thought they’d have learned this lesson from the housing bubble. Instead, we’re going to get a steady dose of the hair of the dog for the next four years, and we can expect more nonexistent money to chase after bad results.
Blowback
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Reagan wisely said:
jgapinoy on January 16, 2009 at 8:04 AM
in other news pitch fork sales are up!
grapeknutz on January 16, 2009 at 8:07 AM
It’s becoming too depressing to even open up Hot Air in the morning. Nothing but bad news and barf inducing stories.
anniekc on January 16, 2009 at 8:08 AM
Dear Mr. Paulson,
I’m starting a new bank (Rovins First Trust & Savings). Please enclose check for 45 billion asap.
p.s. (I promise to pay this loan back the day after B of A does)
Rovin on January 16, 2009 at 8:13 AM
Hey, this is an Ed post, not an Allahpundit. I’d shudder to see AP’s take on this.
Did they also get a second set of Shamwow towels, to help absorb this mess?
rbj on January 16, 2009 at 8:13 AM
“I stand for individual liberty, the entrepreneurial spirit, and the self-reliant citizenry on which this great Republic was founded. For those of us who came to this country, this is the last stop. There’s no where else to go.”
– Mark Steyn
Steyn said this on Rush Limbaugh’s show a couple of weeks ago when he filled in for Rush. It hit me like a ton of bricks.
I know it’s a bad thing to do, and this has never happened to me before, but I’ve lost hope. I truly have.
IrishEi on January 16, 2009 at 8:17 AM
We’re so f#%&ed.
AZCoyote on January 16, 2009 at 8:18 AM
I am soooo disgusted with Washington.
Fire Paulson and Bernacke. Vote out the incumbents.. Let those damn banks fail. They were mismanaged and now they give more money to them so they can mismanage the banks more.
I suppose Citibank will be given more money now…and the auto companies, etc., etc. ugh
becki51758 on January 16, 2009 at 8:19 AM
As a rule, government intervention has nominal initial benefit and long-term detriment. What politicians – and their esteemed appointments – hope is that the detriment will be far enough down the road that the public’s short memory allows our fearless leaders to escape unscathed.
This time, however, the results of their ignorance, deceit, cowardliness, haughtiness, blindness, stupidity, (pick one or more) showed up immediately and they don’t know what the hell to do.
Morons.
pugwriter on January 16, 2009 at 8:20 AM
When in a hole, it’s wise to put down the shovel and stop digging.
Hell, he’s using a back-hoe at full speed.
Tim Zank on January 16, 2009 at 8:22 AM
Meanwhile in other news
a headline on bloomberg
Citigroup will split after posting a 8.2 Billion loss in the fourth quarter.
and one could be forgiven for expecting that this cycle is a long way from being over.
Skandia Recluse on January 16, 2009 at 8:23 AM
anniekc on January 16, 2009 at 8:08 AM
I know what you mean. My gag reflex was in overdrive reading the Pepsi post and now this.
tru2tx on January 16, 2009 at 8:24 AM
Ours is not to question why, ours is but to pay the ridiculous bills. And die.
Bugler on January 16, 2009 at 8:26 AM
http://www.foxnews.com/story/0,2933,480058,00.html
“FOX News Poll: 80 Percent Say Debt is Ruining the Economy”
“Four out of five Americans think debt — government and personal — is ruining the nation’s economy, and half feel the bailouts and billions of dollars in government spending to stop the economy’s decline has the country drifting away from capitalism and heading toward socialism.”
the_nile on January 16, 2009 at 8:26 AM
They seem to be getting away with it thus far. I mean, you’ve got Pelosi, Reid, Dodd, and Frank going on TV and basically passing all the blame onto Bush. While he certainly does deserve a lot of heat here, the idea that the people running the LEGISLATIVE branch of the freaking government bear no responsibility for a disastrous piece of legislation is laughable and downright insulting.
Is this their strategy for the next four years? Run this country into the ground(and continue to dig) while blaming it all on a guy who be then will be a private citizen living in Dallas. I’ve never such a collection of incompetent, corrupt, and cowardly individuals.
Doughboy on January 16, 2009 at 8:26 AM
This bailout mania is really making me sick.
If these institutions continue to see a decline, will there be ever more bailouts? When does it end?
JetBoy on January 16, 2009 at 8:30 AM
Yes.
Wethal on January 16, 2009 at 8:30 AM
I’ve wondered the same thing: If the USA comes crashing down in a spasm of socialistic rigor mortis and a dumbed-down population of looters, where do we go? Australia? Suffering the same ailments.
I know: Mars! But wait, the Obamites are going to curtail solar-system exploration right after they decimate the military: no Martian colonies in my lifetime, or my kids’ either.
I guess we’re going to have to stay right here and mount a second American Revolution, based on those quaint old principles: Life, Liberty, and the Pursuit of Happiness.
MrLynn on January 16, 2009 at 8:32 AM
After rain comes sunshine , after Carter comes Reagan.
That’s just how life works.
the_nile on January 16, 2009 at 8:32 AM
Maybe that’s why I just got a letter from Citi denying my request (that a rep agreed to on the phone) to waive a $39 late fee on my CitiBank card.
You know, that $39 will go a long way toward wiping that $8.2 billion loss off the books.
MrLynn on January 16, 2009 at 8:36 AM
Hey, what a coincidence. I, um, started my own bank too! Yeah, that’s it! ;-)
flyawaybird on January 16, 2009 at 8:40 AM
MrLynn on January 16, 2009 at 8:32 AM
I am hoping for Texas to become the Republic of Texas and secede from this madness.
tru2tx on January 16, 2009 at 8:46 AM
I’m about ready to start my own bank too…First National Bank of Mattress
JetBoy on January 16, 2009 at 8:46 AM
MrLynn on January 16, 2009 at 8:36 AM
Don’t feel bad. A couple of years ago I ditched my Bank of America credit card because they decided to give credit to illegal aliens without social security numbers. Got a card with CitiBank (which also holds my mortgage after buying it from Penn Mutual) with a $25,000 line of credit. Two months ago I get a letter from Citi saying they have closed my account because it has been inactive for more than 12 months (meaning only that I had no balance on which to pay them interest.) I called them up to complain to no avail.
IrishEi on January 16, 2009 at 8:48 AM
I hate this stuff too. But what they’re really doing is saving lesser banks, with less solid assets, through larger more stable banks. BofA is for the most part a solvent and somewhat prudent entity. So now they are able to buy up the lesser banks (a la Potter of Its a Wonderful Life) but on the US taxpayer dole. So what’s better, to have the lesser banks just fail or to be operated under the umbrella of some rather prudent bank managers such as those at BofA?
JonPrichard on January 16, 2009 at 8:49 AM
From Hugh Hewitt….
Indeed, massive government spending sometimes destroys more jobs than it creates. Every dollar the government takes in through taxes is a dollar taken out of circulation from the economy. It’s a dollar that does not go to your local restaurant, or hardware store, or movie theatre. When government spends massive sums financed through taxes, it can destroy more jobs in the private sector than it creates in the public sector.
The only other way to finance massive government spending is through simply printing more money. Government can do that; it controls the printing press. However, creating money out of thin air doesn’t create wealth. If the money supply rapidly expands while the amount of goods and services being produced declines (the definition of a recession, which America is in) the result is massive inflation. This inflation penalizes saving and investments and burdens long-term financial planning and capital formation, worsening the economic situation.
My comment: Boy, do I feel sorry for my teenage son’s….
Keemo on January 16, 2009 at 8:50 AM
Really?
IrishEi on January 16, 2009 at 8:52 AM
I have been contacting my Congress-folks for weeks trying to wave my tiny fists in the air to help forestall this train wreck from proceeding any further. It’s futile, and I guess that I knew that going in.
All I can do is to remind them how tough they are making it to follow my Christian dicta to Love my enemies. The Lord is surely testing me in this.
ss396 on January 16, 2009 at 8:52 AM
the nile: I think the difference this time that this isn’t a normal rain event. This a catastrophic 1000 year flood so if the American people ever wise up to vote the thieves out (and we had a chance 2 months ago and took a pass…) then what’s left may not be able to be saved….even by Reagan 2. It’ll take a complete generational reset that would take decades to correct the mess we’re in now.
TheAdmiral on January 16, 2009 at 8:57 AM
And yet my Republican representatives in Congress voted for the TARP bailout BS… sheesh. What happened to fiscal conservatives? Why did people vote for these RINOs? … oh, wait.. because our GOP leaders got on TV and told us to, because our Republican President (a RINO) got on TV and scared the voters into thinking that the world would end if poorly run banks went under and told them the bailout had to happen NOW. It’s freaking unbelievable that almost no Republican candidates had the backbone to protest this crap.
Paulson and Bernanke are crooked but they aren’t like the RINOs who are shoving it in our face that they can do this stuff and we’ll re-elect over 90% of them.
popularpeoplesfront on January 16, 2009 at 9:04 AM
What’s truly amazing about this story is that the numbers no longer matter. They could have said that they were giving BoA $50 billion or $75 billion, and it wouldn’t have changed anything about the story. We are going to be in a world of hurt with run away inflation in about two years. And let’s remember that it was Obama who supported the bailout along with every other democrat.
RedSoxNation on January 16, 2009 at 9:11 AM
I have an outstanding balance with BoA.
The next time they call me, I’m telling them to take it out of their Hussein coronation fund.
madmonkphotog on January 16, 2009 at 9:12 AM
At what point do congressman wake up and oppose these asinine bailouts? How many have to do more damage than good before these idiots – if only for political reasons – begin thinking, “Hmmm…. I can look really smart by saying this stuff doesn’t work.”
We’re trying to put out a fire by drowning it with gasoline. Hell of a job, Paulie!
Sugar Land on January 16, 2009 at 9:13 AM
Keep us posted, if they do, a lot of us are headed your way!!
Tim Zank on January 16, 2009 at 9:19 AM
One of the nicknames floated for Bob Johnson’s Charlotte NBA team, which became the Bobcats, was the “Charlotte Bankers”. Sounded too corny at the time, talk about bad PR had they gone that way though.
not that the bobcats are all that popular anyway
jp on January 16, 2009 at 9:20 AM
Personally I’m hoping for a Coast to Coast effort.
starting with Alaska, add British Columbia Canada and then cut through the Midwest down to Texas.
For Queen I nominate Sarah Palin
jp on January 16, 2009 at 9:21 AM
Agreed Annie. Between reading HotAir and watching Fox News I’m about ready to drive to DC and scream a lot. Where is this money coming from? Where the hell did they first half go? They can’t even tell us that…
cannonball on January 16, 2009 at 9:23 AM
Mike Pence (R-IN) is on Fox News now slamming the Democrats. Most of the “tax cuts” in the current bailout wording are actually “rebates” just like the last round. They did NOTHING AT ALL? How can these idiots keep repeating this insanity?
cannonball on January 16, 2009 at 9:27 AM
As a fellow Texan(H-Town to be specific), I’m actually thinking this is more inevitable with each passing day. It could take decades to reach the breaking point, but mark my words, there WILL be a breaking point.
It’s one thing for red states and blue states to have differing views on social issues or the degree to which the federal government should be involved in our lives. But when the competently run states start having to bail out the poorly run ones(i.e. California, New York, Michigan), American citizens will turn on each other.
I sure as hell don’t want my tax dollars going to help out some schmucks on the Left Coast who are too dumb to realize that voting in the same left-wing nutcases every election is what’s bankrupting their state. And I definitely don’t want them moving down here and systematically turning Texas into California-South.
Taxation without representation led to the first American Revolution. It could also spark a second one.
Doughboy on January 16, 2009 at 9:36 AM
It looks like the bailout is not working. Bank of America and Citigroup which had been solvent are both on the ropes after taking over Smith Barney and Merril Lynch. Thanks to government involvement our largest financial instution are failing. The problem has worsened since washington started bailing the financials out. Now add the American Auto industry. Talk about corporate welfare…this is it. And who pays for it all? Us that’s who.
kanda on January 16, 2009 at 9:38 AM
So if their balances are so low, why aren’t we charging them fees?
krl on January 16, 2009 at 9:39 AM
this is exactly what is happening in the south, tons of northerners moving South, then voting Democrat and its gradually changing the Govt. in the South for the worse. NC is one state this has happened in.
idiots
jp on January 16, 2009 at 9:43 AM
oh, BofA posted a 2.something Billion loss for 4th quarter
jp on January 16, 2009 at 9:44 AM
How can these idiots keep repeating this insanity?
cannonball on January 16, 2009 at 9:27 AM
Because guys like Pence are few and far between.
We have a new quasi-royalty calling the shots now, and apparently they won’t be satisfied until a monarchy is reestablished. Us serfs are supposed to shut up and just keep tilling those fields.
Bishop on January 16, 2009 at 9:46 AM
Time for a Republic of Texas party…well maybe a Party also. Doughboy, what part of H are you in, I am in Old Katy?
Rob
rgranger on January 16, 2009 at 9:52 AM
When we have double digit inflation by the end of Obama’s first term, what are the chances that Obama and the media will still be blaming President Bush?
Obama will be given two terms to “fix” the economy.
Nationalizing the banks just streamlines the process by which the government picks your pocket.
Angry Dumbo on January 16, 2009 at 9:56 AM
Laura Ingraham is reporting that many senators who voted for the previous bailout has now voted against releasing the 2nd part…including my Senator Arlen Spector. wow
I passed out hearing that.
becki51758 on January 16, 2009 at 10:06 AM
Somebody get this socialist, Zippy Paulson, off the stage, immediately.
For the HA crowd, a challenge: Name 1 cabinet official, of either party, in any generation since the Civil War, who has done greater damage than the panic master, Zippy Paulson. Take your time…..
james23 on January 16, 2009 at 10:12 AM
I know a sure-fire investment for the next few years; the companies that supply the ink, currency paper stock, and currency printing equipment to the government. It’s as if we hired the Zimbabwean Finance Minister as a consultant.
michaelo on January 16, 2009 at 10:20 AM
Man you got that right. I just moved to NC from NY in July and this place is crawling with liberals. They are trying to take over. My mission is to save NC from them. It’s gonna be a hard fight with whats happening on the coast of the state. Those lefties are takin over.
kanda on January 16, 2009 at 10:33 AM
I’m in the Westchase area, but I’ll be moving in about 3 months to Katy with my fiancee. We’ll be west of Katy Mills Mall near Cinco Ranch.
That’s why I don’t want the libs screwing up this city and state. We’re building a brand new 3000 square foot home for just over 200 grand, all on a middle class income. Try pulling that off in a blue state.
Doughboy on January 16, 2009 at 10:35 AM
That house may be worth a lot less than your paying for it before you get it built. Home prices are still falling. Check your mortgage. I bet you’re stuck for the original purchase price if the value goes down. Older mortages might get a bailout but not the new ones. It’s happening here in NC $400k houses trying to sell in the $180k range which is the latest appraisal range for them still not selling. Banks here take em and can’t give them away. Whole neighborhoods of houses all up for sale.
kanda on January 16, 2009 at 10:42 AM
I moved back to Texas from Seattle in 1992 and that is exactly what happened up there. It’s MUCH worse now, but at the time I left I used to think that Seattle was turning into another Southern California (LA), only with bad weather.
I love Texas too much for it to become like the West Coast. But I honestly can’t see that happening. Texas is not only a great place to live – it’s a state of mind.
tru2tx on January 16, 2009 at 10:46 AM
I see no hope for the future of this country. The world claps with glee as America, the once greatest nation on this planet, falls to her knees mortally wounded. Is no one willing to save Lady Liberty, the same lady who has, at one time or another, saved us all?
http://conservativepolitics.today.com/2009/01/16/we-had-seasons-in-the-sun/
Virginia Shanahan on January 16, 2009 at 10:49 AM
In a word, “No.”
They never have, and never will.
IrishEi on January 16, 2009 at 10:53 AM
Some areas of Katy are having issues. Mostly north of the Katy Freeway. That area is on the decline.
But Cinco Ranch is a good place to live in. Lots of nice homes, crime is low, businesses are doing well(relative to the rest of the country), and it’s absolutely beautiful out here.
Unless we go into some sort of depression, I can’t imagine this house being anything other than a good investment in the long term. And besides, my fiancee and I are not putting our lives on hold because most of this country can’t get its collective sh-t together.
Doughboy on January 16, 2009 at 10:56 AM
Our tax dollars keep these banks afloat, while they raise interest rates on our credit cards to over %25 with no legal limit to how they can raise it. They are juicing the American people for this bailout and we get a measly $500 rebate (thanks to Bush), which will be taken away as well.
Indy928 on January 16, 2009 at 11:01 AM
Whenever the govt backs any kind of enterprise with a guarantee, i.e. student loans, bank deposits, BAIL OUTS, etc this gives people incentive to overvalue assets & pay themselves more etc. etc.
It actually make bankruptcy a moneymaking venture.
This shat has been a long time coming.
I agree with you. Just like real estate. More people means less room, means more homes are needed.
If I had loads of $$ I’d be buying up houses like candy & I’d sit on them, even for 10 yrs if I had to, but the market will recover.
Badger40 on January 16, 2009 at 11:03 AM
Parts of Texas are overrun by libs. Austin obviously is a blue island in the middle of a red sea. And even Harris County went marginally for Obama this past election.
But as a whole, this is a bedrock of conservatism and there is too much pride among the people here to ever allow Texas to become a nanny state.
Doughboy on January 16, 2009 at 11:06 AM
There is hope for America if we can get the politicians in line. They are the ones out of control ruining this economy. If we don’t vote these clowns out of their career offices we the people are the looney ones.
Every major issue we have is the direct result of government involvement. Healthcare was destroyed by government, The financial sector was, the auto industry was, the energy indusry is. You can blame it on the left but it’s the government who made the laws that did it.
No federal incumbant should be reelected. In six years we can replace all of them. Maybe along the way we’ll find some conservatives and some liberals who will do the will of the people. At least with the economy going south now it gives us this opportunity if we take it. This may be America’s final opportunity to keep our republic.
Simply vote against the incumbant of whatever republicrat party is in office when you vote. They have failed us.
kanda on January 16, 2009 at 11:07 AM
Ah, crap.
Count to 10 on January 16, 2009 at 11:11 AM
Best of luck with your new house. I hope Texas stays immune to this recession.
kanda on January 16, 2009 at 11:12 AM
Amen and say hallelujah!!
tru2tx on January 16, 2009 at 11:19 AM
Doughboy,
drop me a note, maybe we can do a beer sometime. I am out near the Love’s truck stop west of katy.
katyconservitive@986.org
Rob
rgranger on January 16, 2009 at 12:18 PM
Dear Texans:
Has this last election taught you nothing?
Take nothing absolutely nothing for granted. Texas isn’t politically safe by any means.
Stand up and fight!
Chaz706 on January 16, 2009 at 9:20 PM