Break Up the Banks
Our leading financial institutions announced that they had actually made a profit in the year's first quarter through the creative manipulation of rules and regulations, lobbied Congress to preserve their ability to raise credit card interest rates just for the heck of it and opposed the administration's plan for restructuring Chrysler, which would save some jobs and honor pension obligations, in the hope that they can redeem the company's bonds at a higher level than they're trading at just now. And, to round out the picture, the Wall Street Journal reported this week that lending at the 19 largest TARP recipients was 23 percent lower in February -- by which time these banks had received hundreds of billions of dollars in public funds intended to enable them to lend more -- than it had been in October, before the floodgates of tax dollars had been fully opened.</br></br>The week began with a burst of creative accounting. Citigroup, into which we've sunk more dough than any other company, with the possible exception of AIG, claimed a profit for the first quarter of this year because its bonded debt has lost value, which under the rules of accountancy enabled it to register a one-time gain equal to that lost value, because Citi could, in theory, buy back its own bonds for less. J.P. Morgan Chase, whose fire-sale purchase of Bear Stearns we taxpayers backed, declared a similar profit because of a similar decline in the value of its bonds.</br></br>As events would have it, the very same Citigroup and J.P. Morgan Chase are the lead negotiators for the banks that are objecting to the Obama administration's efforts to restructure Chrysler. Chrysler's bonds, which these banks hold, are trading at 15 cents on the dollar, the amount the government offered to pay the banks in its initial proposal to restore the company to viability. Yesterday, the government upped that amount to 22 cents, plus a 5 percent equity share in the company. Citigroup and J.P. Morgan Chase, however, insist that they and their fellow banks are entitled to more, though that "more" could only come at the expense of Fiat (the auto company that is providing the new car lines and technology without which Chrysler will fold) or the company's retirees (to whose health-care fund Chrysler is legally obligated) who built the company, or the taxpayers who are keeping Chrysler alive.</br></br>Instead of playing Scrooge (and a publicly subsidized Scrooge, at that), what the banks should do is lend Chrysler their accountants. Maybe they'd show that the company turned a profit last year.</br></br>The banks' lobbyists, meanwhile, have been hard at work, too. Bills to limit credit card fees and penalties -- my favorite fee is the one banks charge some customers for making (not missing, making) a payment -- are moving through both houses of Congress, but the Senate version has yet to receive any support from Republicans. A bill that would enable bankruptcy judges to modify mortgage terms has also hit a wall in the Senate, with Republican leaders claiming the backing of all 41 of their members to filibuster the bill when it comes to the floor.