The ability of banks to raise capital is certainly positive but the idea of shares rallying amid the capital raising and dilution is "counterintuitive," Bank of America CEO Ken Lewis said on CNBC this morning. BofA shares were also rallying even as the government said it needs to raise an industry-leading $33.9 billion. Citigroup stock was also a big winner after the government's curious declaration that it "only" needs to raise $5 billion. While much of the focus is on the stress tests and banks' efforts to raise cash, the real story is Geithner's Public-Private Investment Program (PPIP), says William Black, an Associate Professor of Economics and Law at the University of Missouri - Kansas City. The PPIP is the "greatest boondoggle in the history of the world," saysBlack, a former bank regulator who was counsel to the Federal Home Loan Bank Board during the S&L crisis. As occurred during the S&L era, Black says the PPIP will allow banks to exchange "trash for cash" and turn "real losses into faulty gains." If the goal of Tim Geithner and other regulators was "to rip off the American taxpayer for the benefit of the least-deserving wealthiest people you can imagine, well - mission accomplished," Black says."The Greatest Boondoggle in History": Banks Buoyed at Taxpayers' Expense
Posted May 08, 2009 04:05pm EDT by Aaron Task in Newsmakers, Recession,Banking
Saturday, 9 May 2009
Bank stocks soared Friday, including Wells Fargo and Morgan Stanley,which sold shares a discounts of more than 10% below Thursday's close.
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