Paulson Says Bank Mergers May Be `Best' for Economy (Update1)

[leistb]

Paulson Says Bank Mergers May Be `Best' for Economy (Update1)

By Rebecca Christie

Oct. 21 (Bloomberg) -- Treasury Secretary Henry Paulson advocated mergers and acquisitions to strengthen the banking industry, while reiterating that the aim of a $250 billion bank recapitalization plan is to stimulate lending.

``There will be some situations where it's best for the economy and for the banking system for there to be a consolidation,'' Paulson told PBS television's Charlie Rose in an interview that will be broadcast tonight.

While the Treasury is ``not going to use this money to prop up failing banks,'' there will be ``some consolidation,'' the Treasury chief said. As an example, he cited Wells Fargo & Co.'s planned acquisition of Wachovia Corp. as a combination that's a ``very good thing for the system.''

The Treasury plans to purchase a $250 billion stake in financial companies to inject capital into a banking system struggling with the worst credit crisis in at least seven decades. The equity-purchase program is part of a $700 billion rescue package enacted this month that also includes government purchases of distressed mortgage-related loans.

Paulson urged banks to ``deploy'' the funds they receive, not ``hoard'' them.

In the interview, Paulson said the U.S. government has already taken ``bold steps that will make a difference in bringing confidence back, particularly to the banks.'' He tempered those comments by adding that ``clearly we're going to have a number of difficult months ahead of us in terms of the real economy.''

To contact the reporters on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net.

Last Updated: October 21, 2008 16:19 EDT

http://www.bloomberg.com/apps/news?p...E9A&refer=home

[MomCares]

``There will be some situations where it's best for the economy and for the banking system for there to be a consolidation,'' Paulson told PBS...

I often get the impression that in Paulson's mind the banking system IS the economy.... the taxpayer be damned.


MomCares

[dharma]

Note the unstated point in this: a fair amount of the "government" money being shoveled into bank vaults will be used not to increase lending or repair balance sheets, but to allow the banks to buy other banks—to get bigger and improve market share.

I'm so grateful to be a taxpayer. Sigh.

[leistb]

Originally Posted by dharma

Note the unstated point in this: a fair amount of the "government" money being shoveled into bank vaults will be used not to increase lending or repair balance sheets, but to allow the banks to buy other banks—to get bigger and improve market share.

Which begs the question of why did they market the bailout bill in the fashion they did. Of course, that's a rhetorical question.

This tangled web of deceit is just maddening!

[ltow]

cliche - don't put all your eggs in one basket

tv says now the too big to fail is too too big to fail