Monday, December 27, 2010

Bailouts Only Postponed The Inevitable Failure For 98 Banks

Bad business practices will lead to failure. Infusing money into a failing business without said business changing the original cause that created failure, is simply postponing that failure.

Capitalism, via Merriam Webster dictionary:

An economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.

WSJ reports the third-quarter financial results shows that 98 of the smaller banks who received bailout funds are in jeopardy of failing. That number has risen from 86 since the second quarter.

Nearly 100 U.S. banks that got bailout funds from the federal government show signs they are in jeopardy of failing.

The total, based on an analysis of third-quarter financial results by The Wall Street Journal, is up from 86 in the second quarter, reflecting eroding capital levels, a pileup of bad loans and warnings from regulators. The 98 banks in shaky condition got more than $4.2 billion in infusions from the Treasury Department under the Troubled Asset Relief Program.


More:

A Federal Deposit Insurance Corp. spokesman declined to comment on the Journal's analysis, which also calculated that 814 of the nation's 7,760 banks and savings institutions are troubled according to these standards, up from 729 at the end of the second quarter. The FDIC's official list of problem banks, which uses different criteria from the Journal's analysis, includes 860 financial institutions. The banks aren't publicly identified.

One example of a TARP recipient in deep trouble: closely held Legacy Bank of Milwaukee. José Mantilla, Legacy's president and chief executive, said the bank lends to an underserved, lower-income customer base.


Lending money to those one knows cannot pay it bank is a recipe for disaster and failure. Borrowing money one knows they have no financial means to pay back, is irresponsibility.

Handing tax payer money and TARP funds to businesses that are failing because of bad business practices... is incompetent.

TARP was created by George Bush administration in 2008, one decision I and many other conservatives disagreed vehemently with.

It has largely been administered by the Obama administration.

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