Remember the $700 billion to the banks?

Backed up by you and me of course. You may have thought that it was put out there to help banks make loans to people and businesses who need them and could pay them back. You'd be wrong. At least if you believe this article in The NY Times. Apparently the true purpose of the cash infusion is to allow some banks to buy up other banks, to consolidate the banking business into fewer and fewer hands.

It is starting to appear as if one of Treasury’s key rationales for the recapitalization program — namely, that it will cause banks to start lending again — is a fig leaf, Treasury’s version of the weapons of mass destruction.

In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation. As Mark Landler reported in The New York Times earlier this week, “the government wants not only to stabilize the industry, but also to reshape it.”

Oh.

The author, Joe Nocera, concludes:

We have long been a country that has treasured its diversity of banks; up until the 1980s, in fact, there were no national banks at all. If Treasury is using the bailout bill to turn the banking system into the oligopoly of giant national institutions, it is hard to see how that will help anybody. Except, of course, the giant banks that are declared the winners by Treasury.

So money for loans needed to keep the economy going is still scarce. Nocera finds comfort in this:

Late Thursday afternoon, I caught up with Senator Dodd, and asked him what he was going to do if the loan situation didn’t improve. “All I can tell you is that we are going to have the bankers up here, probably in another couple of weeks and we are going to have a very blunt conversation,” he replied.

He continued: “If it turns out that they are hoarding, you’ll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay.”

I am not sure what the wages for hell are these days, and I still don't understand any of this despite Jack's best efforts, but I read this in the New York Times. So it must be true.

even though it is hard to believe that bankers might be using our money "to line their pockets."
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