Thursday, October 23, 2008

This Is Why Most Americans Opposed the Bailout

From an op-ed in the NY Times, written by David Scharfstein and Jeremy Stein, two Harvard professors:

Although there are many things to like about the government’s plan, the failure to suspend dividends is not one of them. These dividends, if they are paid at current levels, will redirect more than $25 billion of the $125 billion to shareholders in the next year alone. Taxpayers have been told that their money is required because of an urgent need to rebuild bank capital, yet a significant fraction of this money will wind up in shareholders’ pockets — and thus be unavailable to plug the large capital hole on the banks’ balance sheets.

Moreover, given their own equity stakes, the officers and directors of the nine banks will be among the leading beneficiaries of the dividend payout. We estimate that their personal take of the dividends will amount to approximately $250 million in the first year.


Frank Staheli said...

Very good point. There are a plethora of such good points that, if Bush, Bernanke, and Paulson hadn't screamed that we need to hurry(!), we'd have been able to see as detractions from the claimed objective, which now clearly is NOT being achieved.

I've written here more on how the $700 billion is another example of how socialism provides more welfare for the rich than it does for the poor.

Cameron said...

Hey Frank, did you get the email I sent you?