We are unfortunately not privy to the backroom deals and promises that are passing between Treasury Secretary Henry Paulson and the honchos who are benefiting from the government's massive bailout. However, two things are becoming increasingly clear: first, the financial industry has not gotten the memo about changing their business practices, and, second, the $700 billion in tax money that is keeping these companies afloat is not finding its way down to the average citizen. The big bailout was originally sold as a desperate maneuver to keep Wall Street afloat. Paulson has indicated that these funds would enable lending companies to service their toxic debt and, in turn, continue lending. In this way, America would be able to count on the credit that kept it running; businesses would be able to meet their payrolls, people would be able to buy houses, and the world would continue to turn.

Instead, some banks seem to be going on a buying spree, snatching up smaller, less successful institutions while prices are low and the getting is good. Citigroup (NYSE: C), for example, used the Wall Street fire sale to make a bid for Wachovia and pick up Forum Financial, shortly before asking for a second huge bailout. Similarly, Bank of America (NYSE: BAC) has decided to take over Merrill Lynch. A clever MBA could, undoubtedly, filter these purchases through a secret capitalism decoder ring and come up with a logical reason for them, but one wonders how gobbling up companies (and their toxic debt) is likely to help Bank of America and Citigroup to stay afloat, much less enable them to extend money to consumers. It is becoming clearer and clearer that the huge influx of taxpayer money is less about saving consumers than it is about enabling big companies to get even bigger.

Continue reading Citigroup bailout sheds light on just what the taxpayers are buying

Citigroup bailout sheds light on just what the taxpayers are buying originally appeared on BloggingStocks on Sat, 29 Nov 2008 13:40:00 EST. Please see our terms for use of feeds.