Birth of a boondoggle

On CNBC this morning, Mark Haines asked, “do any of you remember politicians saying they needed to pass the $700 billion bailout to give money to banks to buy other banks?”

Well, no, but we didn’t hear that financial firms needed the money to increase year-end bonuses, either, but Time says that’s happening too.


“It’s not the government’s money directly, but in the case of Morgan Stanley and Goldman Sachs, they were facing a severe crunch,” says analyst Brad Hintz, who covers financial firms at Sanford Bernstein, and is a former chief financial officer of Lehman Brothers. “Had it not been for the government’s help in refinancing their debt they may not have had the cash to pay bonuses.” When asked, the U.S. Treasury would not comment directly on Wall Street’s bonus plans, though spokeswoman Brookly McLaughlin did reiterate the bailout’s intent: “There is broad agreement that the Treasury’s capital purchase program was intended to strengthen the financial system and increase lending,” she said.

As for the taxpayer money being needed to unthaw the credit markets, various reports have made it clear that banks are sitting on the money instead.