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Friday, March 24, 2023

It’s your money, the way I see it (Part VIII)

By Andrew Robbins

CSMS Magazine Staff Writer

Across our country there is an ongoing debate, and the main question is whether Wall Street’s investment bankers fake another financial crisis. 
    Treasury Secretary Paulson, a former Goldman Sachs chairman and chief executive officer, was quick to recommend Congress utilize taxpayer dollars to bailout and capitalize Wall Street firms. Under Paulson’s leadership, the Internal Revenue Service (IRS) Tax Code was altered. Changes to the IRS regulation allow banks to arbitrarily inflate their allowance for doubtful accounts, faking financial loss, while deferring federal income tax.
     Three Wall Street banks were quick to lineup for taxpayer assistance: Citigroup $25 billion, J.P. Morgan Chase $25 billion and Goldman Sachs $10 billion.
     Banking lobbyists claim there is too much competition in the banking industry and at a minimum one third of all US banks must be eliminated. Implementing their plan would create Wall Street’s North American Banking Cartel.
     Across the US, there exist over 6,000 mom and pop banks. These lending institutions are owned by shareholders but they are so thinly traded that none of these institutions are listed on a major stock exchange. The result, most lenders were insulated from toxic losses and they are financially solvent. One Michigan bank, from America’s depressed automobile state, released a letter to stockholders, “Dividend payout increased 15% in 2008 and 2009 was projected to be ‘Their Best Year Ever’.”
     There are over 2,000 banks traded on major stock exchanges. Less than 200 are listed on the government’s watch list. Two hundred banks out of 8,000 we are not at risk for a banking meltdown.
     After Treasury Secretary Paulson empowered PNC Financial with a 7 billion dollar taxpayer infusion, at fire sale purchase price, PNC attempted to merge with National City Corporation (NCC). Immediately, several banking institutions got the message and lined up to accept a taxpayer handout from the US Treasury. Paulson’s message was clear, either borrow from the Treasury or, threatening acquisition and merger, I will fund your competitors and force you out of business.
     Within the PNC proposal none other than Citigroup, Morgan Chase, and Goldman Sachs were employed to provide an opinion for merger. PNC paid $2.5 million to Citigroup and agreed to pay $7.5 million upon the consummation of the merger. PNC paid J.P. Morgan $2.5 million in fees and agreed to pay J.P. Morgan and additional $7.5 million upon the consummation of the merger. Goldman Sachs is entitled to receive a transaction fee of $25 million for its services in connection with the merger. The 22 million-dollar is contingent upon the consummation of the merger. All three firms recommend the merger proceed.
     Its nice to seek how your taxpayer dollars move from Main Street throughout Wall Street. 
     Merger losers are the NCC employees that mistakenly believed in their employer’s leadership. Those that invested their retirement dollars in NCC stock have lost everything. 
     Hours before the announced merger, NCC leadership stated during an investor conference call, “The 5 billion dollar cash infusion from private (non-government) investors, in the spring of 2008, placed the bank on solid financial footing and NCC in the position to acquire competitors.” 
     Other losers are the NCC and PNC shareholders. PNC ownership and dividend distribution are diluted with the issuance of additional shares compensating NCC stockholders and the US Treasury.
      Treasury’s infusion of cash to banks, that had no desire to borrow from the Treasury, has the effect of the US Government competing with bank depositors for certificate of deposit (CD) interest rates. The net effect, driving interest paid to CD deposit holders across our nation, is lower. Earning interest on a CD for your child’s education or supplementing a retiree’s income now competes with Wall Street’s plan for creating a banking monopoly. 
     The winners are the NCC leadership. They share a golden parachute that provides 50 million dollars after taxes. The US Treasury’s infusion of cash now heads to the courtroom. Lawyers figured out how to get their share. 
GOD, I love this country.
NoteCSMS Magazine and the author are not in the business of providing financial services or advise. Prior to investing, readers should seek professional assistance.

Andrew Robbins is the author of “It Took My Breath Away: One Man’s Experience May Save Your Life.” He may be reached by email at: awrobbins1@earthlink.net

Also see It’s Your Money, The Way I See It (Part VII) 

It’s Your Money, The Way I See It (Part VI) 

t’s Your Money, The Way I See It (Part V)

It’s Your Money, The Way I See It (Part IV)

It’s Your Money, The Way I See It (Part III)

Also see It’s Your Money, The Way I See It (Part II) 

It’s Your Money, The Way I See It 

 Telling us the truth: Bailing out Wall Street or bailing out the country? 

The financial crisis in the US and the mirage of an enlightened global capitalism

Global stock markets stumbled in the aftermath of the Wall Street downslide on Monday

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