Secretary of the Treasury Paulson's $125 billion "giveaway" to country's largest banks

The stock market is gyrating more wildly than anytime in history. In the last few weeks, the broader economy has deteriorated faster than anytime in the last 70 years.

Meanwhile, Secretary of the Treasury Paulson's $125 billion capital "giveaway" went to nine of the country's largest banks. According to the New York Times, the banks probably won't even use Paulson's money to extend loans to consumers and businesses (as intended), but will hoard it to make sure they are sufficiently capitalized when their mortgage-backed assets are downgraded. Even worse, the banks may use the money to gobble up smaller local and regional banks.

Paulson knows what the banks are up to; after all, these are his friends. The Treasury Secretary is using his authority to reward his friends rather than doing what is best for the country.

The truth is, the $125 billion was not given to the banks to soften the effects of the recession or increase lending. It was given to make the strong banks even stronger so they could monopolize the industry.

Paulson's real plan is "more consolidation" and less competition, or as economist Michael Hudson says, "Big fish eat little fish".

[Mike Whitney]

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