10 more banks get $18 billion of our money; three are money losers

Posted Oct 27th 2008 9:58AM by Peter Cohan
Filed under: Financial Crisis

Who knows why the Treasury gives our money to some banks and not to others. That comes to mind when considering that we just gave $18 billion to 10 regional banks -- three of which are unprofitable. Why does this matter? Because giving taxpayer money to an unprofitable bank could be as good as flushing it away. I guess Treasury figures it can always get more where that came from, so why not?

Here are the lucky winners of the government bailout lottery that earned a profit and their pre-market stock price change:

SunTrust (NYSE: STI): $540 million -4.6%
Capital One Financial Corp. (NYSE: COF): $374 million -2.3%
Northern Trust (NASDAQ: NTRS): $214 million -2.1%
Regions Financial (NYSE: RF): $206 million -0.8%
Huntington Bancshares (NASDAQ: HBAN): $115 million +6.1%
Valley National Bancorp (NYSE: VLY): $41 million 0%
City National (NYSE: CYN): $16.6 million 0%

And here are the three that lost money but still got taxpayer capital -- the amount of their latest loss is in parentheses:

KeyCorp (NYSE: KEY): ($1.1 billion) -0.7%
First Horizon National (NYSE: FHN): ($118 million) +9.8%
Provident Bancshares (NASDAQ: PBKS): ($6.9 million) 0%

Is there any logic to why the U.S. is giving taxpayer money to banks that are losing money? Wouldn't it be better to merge the money-losing banks with profitable ones? And does the government know whether the ones that are currently profitable will stay that way over the next year?

The secretive process will continue as long as these "folks" are in power. But if they were doing it right, they would make it clear how they were deciding which banks to capitalize and which to cull. And that does not look like it is in the cards.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

Tags: bailout, cof, cyn, featured, fhn, hban, key, ntrs, pbks, rf, sti, vly

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Reader Comments (Page 1 of 1)

10-27-2008 @ 11:28AM

Kent said...

I was surprised ( not really) but more so disappointed to see SunTrust on the list of bailed-out banks. I agree with the writer that troubled banks need to merge with healthier banks. It won't unfreeze the credit markets soon, but at least it protects most of the assets in the short term. How a few Congressman could have a devastating affect on the world's financial institutions is beyond me. Metaphorically, they created a financial holocust. Short of being shot, they need to be punished and held accountable.