Nathan Scandella (personal)

Sin Citi

A few days ago, I complained that the $700B bailout money doled out to banks was not all being used to make new loans. Some of it was being used to acquire other banks. It looks like Citibank, who previously received a $25B infusion of capital, has done just that:

http://www.cnn.com/video/#/video/business/2008/11/24/velshi.bpr.citi.bail.cnn

And now, since they haven't gotten healthier as a result of buying failing competitors (gee, that seems like such a recipe for success!), they need more money. We've just given them $20B more. So, we give out money, with only a gentlemen's agreement that it will be used to create new credit, and it's spent for something else. And to punish this slight-of-hand, what do we do? Reward the perpetrator with more money. This is unbelievable. Whether or not this nonsense brings our economy out of its funk in the short term, this is the worst possible course of action for encouraging responsible banking in the long term.

We have completely screwed ourselves.

Posted at 11:45PM Nov 23, 2008 by Nathan in Economics  |  Comments[0]