Thread: Surprise "Not" - Banks Need Even More Bailout Mon

News Analysis

Banks in Need of Even More Bailout Money

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By EDMUND L. ANDREWS and ERIC DASH
Published: January 13, 2009

WASHINGTON — Even before word came on Tuesday that Citigroup might split into pieces to shore up its finances, an unpleasant message was moving through Congress and President-elect Barack Obama’s transition team: the banks need more taxpayer money.

In all likelihood, a lot more money.

Mr. Obama seems to know it; a week before his swearing-in, he is lobbying Congress to release the other half of the financial industry bailout fund. Democratic leaders in Congress seem to know it, too; they are urging their rank and file to act quickly to release the rescue money. And Ben S. Bernanke, the chairman of the Federal Reserve, certainly knows it.

On Tuesday, Mr. Bernanke publicly made the case that one of the most unpopular and most scorned programs in Washington — the $700 billion bailout program — needs to pour hundreds of billions more into the very banks and financial institutions that already received federal money and caused much of the credit crisis in the first place.

The most glaring example that the banking system needs even more help is Citigroup. Though it already has received $45 billion from the Treasury, it is in such dire straits that it is breaking itself into parts.

Like many banks, Citi is finding that its finances keep deteriorating as the economy continues to weaken.

Even some of the bailout program’s harshest critics acknowledge that things most likely would be even worse without it, and that the bailout had accomplished its most important goal, which was to prevent a complete collapse of the financial system.

Since last September, no major banks have failed and the credit markets have thawed somewhat.

But analysts said the problems are still acute, if less apparent on the surface. Banks have received $200 billion in fresh capital from the Treasury since last fall and have borrowed hundreds of billions of dollars more from the Fed. But in the meantime, the economy fell into a severe downturn last fall that is likely to continue until at least this summer.

Industry analysts estimate rising unemployment and business failures will lead to another $500 billion to $750 billion of losses in coming months. That could bring total losses from the credit crisis to $1.5 trillion to $1.8 trillion, twice as high as earlier estimates.

Citigroup is not alone. JPMorgan Chase, Bank of America, Wells Fargo and most other big banks all expect enormous losses as millions of consumers default on their mortgages, credit cards and automobile loans. Other losses are expected on loans made to commercial real estate developers, small businesses and for highly leveraged corporate buyout deals.

Mr. Bernanke bluntly warned on Tuesday that the government would probably have to infuse more money into financial institutions in the months ahead.

“More capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets,â€

But Mr. Bernanke appears to be warning Mr. Obama and Congressional Democrats that most of the remaining $350 billion — and possibly more — has to go to shoring up banks if they are to resume lending at normal levels.

The banks refused to lend when they got the last bailout and chose to sit on the money.....why would this time be any different!!! This whole thing is infuriating.

In my humble opinion this is all about GREED!