TINY VIOLINS, PLAYING IN THE BANK LOBBY…. The New York Times reports today on “signs of growing tensions between the White House and the nation’s banks.” Apparently, industry executives are “bracing for fights with the government over repayment of bailout money and forced sales of bad mortgages.”
Reading over the piece, I’m not sure what the problem is, exactly.
Some of the healthier banks want to pay back their bailout loans to avoid executive pay and other restrictions that come with the money. But the banks are balking at the hefty premium they agreed to pay when they took the money.
Hmm. When the federal government rescued these institutions from collapse, the deal was the banks would pay back the money and then some. The banks agreed. Now, the banks no longer like the deal.
Meanwhile, the Obama administration wants weaker banks to move more quickly to relieve their balance sheets of the toxic assets, the home loans and mortgage bonds that nobody wants to buy right now. But the banks are resisting because they would have to book big losses.
Hmm. Banks that were reckless enough to take on the toxic assets don’t want to take a loss on their bad bets.
Finally, there is increasing anxiety in the industry that the administration could use the stress tests of the 19 biggest banks, due to be completed in the next three weeks, to insist on management changes, just as it did with General Motors when officials forced the resignation of its chief executive after examining that company’s books.
Hmm. Those who made reckless decisions while bringing their institutions — and the global economy — to the brink of collapse are worried about their job security.
So, it appears there are “signs of growing tensions between the White House and the nation’s banks” because the banks don’t believe in consequences?