When you ain't got nothin', you got nothin' to lose
“Zombie banks” have negative net worth. U.S. law requires the government to shut down banks before they become zombies because zombie banks have nothin', so they’ve got nothin' to lose from paying their executives fat bonuses or taking unwise risks by, say, giving their friends loans for high-risk projects.
Although the FDIC routinely shuts down small banks, the Bush and Obama administrations have shielded big zombie banks from reorganization. We’re now getting a glimpse of how mega-zombies are throwing away the taxpayer money we’re feeding them:
Citigroup Inc, which received $50 billion in Troubled Asset Relief Program funds, made an $8 billion December loan, not to an American entity, but to a Dubai public sector company, according to a newly released Monday memo by Rep. Dennis Kucinich (D-OH), chairman of the House Domestic Policy Subcommittee.
The Goldman Sachs Group, which received $10 billion in TARP funds at the end of October, saw fit to spend $2 billion earlier in the year on the repurchase of company stock, which resulted in an increase in company share price.
The memo notes of that stock repurchase, “That increase would have constituted a significant benefit to top executives at Goldman Sachs, who typically own large amounts of company stock.”
As of January 3, Goldman Sachs CEO Lloyd Blankfein owned 1,995,835 shares of the company, according to the memo.
In mid-November, Bank of America spent $7 billion investing in the China Construction Bank Corporation. Bank of America received $25 billion in TARP funds.
J.P. Morgan Treasury Services spent $1 billion investing in cash management and trade finance solutions in India.
Posted by James on Monday, March 09, 2009