Knock, Knock, Knocking On Paulson's Door

Well the $300 billion given to financial institutions to get them lending did little to achieve that desired effect. The banks held on to the money for dear life, literally, and for good measure. It seems ratings downgrades in the last quarter of $1.84 trillion were enough to eat up all the TARP dollars on the bank's books. Meredith Whitney at Oppenheimer & Co notes that the massive downgrades will lead to "meaningfully lower" capital ratios. In other words, the institutions are no better off now than just before they received their TARP dollars and can be expected to be knock, knock, knocking on Paulson's door.

I have said it before and undoubtedly will again; some of these financial institutions need an orderly wind-down. At a minimum, if we are spending all this money on them, Uncle Sam should outright own them. Shareholders and bondholders lose out, as does management, which should be replaced.

http://www.housingwire.com/2009/01/07/downgrades-outpacing-tarp-funding-analyst/

But rather than getting bang for our buck, Paulson is getting us next to nothing. He claims he is not trying to duplicate private deals, like the one Buffet got with Goldman Sachs. Why in the H E double tootpicks not?!! There is no way for this money giving spree to avoid moral hazard without making these financial companies bear the pain, and a lot of it. So wake up Henry!!

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAvhtiFdLyaQ&

Disclosures: None.