Will the New Plan for Banks Help Investors or Taxpayers?
It’s no secret that the government has to play a juggling act to please the crowd. There are the obvious competing interests between the taxpaying citizen and the worried investors and banks.
Now as Graham Bowley and Mary Williams Walsh point out in their recently written article, “Dissecting Bank Plan for a Way to Profit,” banking executives are not stupid, and will inevitably be looking for ways to profit from the new policies set out by congress.
The issue at question is that of how much toxic assets being purchased by the government (at taxpayer expense) are really worth. The government can try to lend a hand to the banks to ensure that our economy does not collapse, but cannot force the private banks to accept the conditions of their proposed deal. If a bank feels like it will not gain anything (or rather will not gain enough) by striking a deal with the government, then it can easily reject any proposal.
This excerpt of the article summarizes the point: “The proposal, which was announced officially on Monday, has provoked many responses and questions. Can banks that received government bailouts use taxpayer money to bid on toxic assets, in the hope of making a profit? Would that be bad, given that the point of the exercise is to stir up a bit of greed and animal spirits, the lack of which has been holding the economy back?”
Let’s hope that everyone benefits equally from the plans set forth by our representatives at congress, and that whatever proposals are accepted by the banking executives can help the average Joe that is trying to escape the grips of debt.