Being a consummate nerd, when driving I often listen to WTOP radio in Washington; it’s an all-news/sports/weather channel.
At :25 and :55 after each hour WTOP runs a business report. Yesterday at 10:55am the business reporter noted that one company whose stock price was rising on what was generally a down day on Wall Street was Genworth Financial. The reporter noted that Genworth had announced that it will acquire InterBank fsb — and, by doing so, Genworth will become eligible to tap into the funds Uncle Sam is making available through its Troubled Assets Relief Program.
I think that I remember the reporter describing InterBank as "a troubled thrift," but I can’t recollect with sufficient clarity to vouch for that memory. But either way, surely InterBank must be troubled, otherwise Uncle Sam would not be trying to save it with bailout funds (!). So now we have companies (e.g., Genworth Financial) otherwise not sufficiently troubled to be eligible for taxpayer handouts buying up troubled companies (e.g., InterBank) so that the former can get on the government dole. What perverse incentives are afoot.
Genworth Financial in Talks to Buy InterBank, Tap Into Program
By James Callan
Nov. 16 (Bloomberg) — Genworth Financial Inc., the insurer
spun off by General Electric Co., said it’s in negotiations to
acquire InterBank Fsb and with it eligibility for the U.S.
Treasury’s $750 billion bailout program.Genworth is seeking to buy the Maple Grove, Minnesota-based
thrift in order to gain recognition as a savings-and-loan
holding company. Talks are in progress and terms are being
negotiated, Genworth spokesman Al Orendorff said today.
Genworth Financial would join the more than 50 regional
banks offering stakes to the U.S. Troubled Asset Relief Program.
The bank is seeking to tap bailout funds after a surge in claims
at its mortgage insurance unit and investment losses.
Last week, Office of Thrift Supervision spokesman Bill
Ruberry said Genworth Financial was in talks to buy InterBank
and tap the program, a move Genworth said it was
“considering.”
Shares of Richmond, Virginia-based Genworth fell 6 cents to
$1.47 on Nov. 14 in New York Stock Exchange trading. It has
plunged 94 percent this year.
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{ 13 comments }
When the farmer slops the hogs in an open range he is never surprised that all his pigs show up, plus some he has never seen before.
When people have been carefully enculturated to the view that there are no moral restraints on individual desires, and no retribution for amoral acts, we can not be surprised to see the pigs fighting for a place at the trough.
Concentrated gain, distributed pain; and by now we're just numb to the needles that are bleeding us dry.
I suspect Genworth really is troubled if it has dropped 95% since December of 2007. If not, its stock is a fantastic bargain right now.
I suspect that the perverse incentives come from the rules regarding who is eligible for money from a "what business are you in?" perspective, and Genworth needs to have its fingers in the right pies in order to qualify.
Admittedly, though, that's just speculation based on a few bits of information. I know next to nothing about the restrictions on distributing TARP money.
I suspect Genworth really is troubled if it has dropped 95% since December of 2007. If not, its stock is a fantastic bargain right now.
I suspect that the perverse incentives come from the rules regarding who is eligible for money from a "what business are you in?" perspective, and Genworth needs to have its fingers in the right pies in order to qualify.
Admittedly, though, that's just speculation based on a few bits of information. I know next to nothing about the restrictions on distributing TARP money.
I'm surprised GM, Ford and Chrysler haven't thought of this strategy.
Actually timid scholar, I was listening to NPR the other day and one of the financial reporters mentioned that it was a possibility since each of the auto makers run separate financing divisions. GM goes beyond just car loans so it would be interesting to see GM buy up a thrift and then suck out all of the bailout marrow it can get.
How sickening indeed. The stock rose precisely because investors see a potential profit from bailout money. This is very bad when the "capitalists" are placing a premium on aquiring rents, rather than producing goods and services that people want and need. Are you guys sure capitalism isn't dead?
Seanooski,
I am the proverbial streetman, my economics fall into the basic simplicity of, "if'n I have it in my pockets then I can spend it, if I don't have it then I can't spend it."
If my pockets are empty tis time to work.
In my humble opinion capitalism is not a political philosophy, it is not a social philosoplhy, and it is not even an economical philosophy. It is a personal, individual, and natural drive that can be seen to be shared in a wide spectrum of animal life, if one only takes the time to be open minded and look. Capitalism is as natural to life as seeking sustinance because that is exactly what it is, seeking sustinance in quantities to ensure survival beyond today and through the tough times that nature is going to send as part of nature's random and fickle change.
Greed is a character flaw, it is not a facet of capitalism. Greed, wanting something one hasn't earned, is better assigned to socialism where it is a matter of faith.
My firm belief is, that being true is why capitalism can't be killed nor can it be considered as a counter balance or counter arguement to socialism. Socialism has no natural root in animal behavior; and, socialism is a social philosophy cum poltical philosophy.
Those that are subjects of this post are not capitalist, they are socialist looking for some redistribution of wealth they haven't earned.
I couldn't agree more vidyohs. Of course, I was being facetious to ask the question. I'm just so disturbed that when the great unwashed use the word "capitalist", it's those clowns begging on Capitol Hill that they think of.
As others have noted, seanooski, the clowns begging on Capitol Hill are just responding to incentives. I'm not so sure the unwashed aren't correct to call them capitalists, especially if you agree with vidyohs' argument that capitalism is "seeking sustinance in quantities to ensure survival beyond today and through the tough times that nature is going to send as part of nature's random and fickle change". The clowns are in it for the money, not to make a statement.
"The clowns are in it for the money, not to make a statement."
And that,Sir Kevin, has a better than fair chance at being the exact reason socialism developed as a philosophy.
The statement developed later, after they got the money, as justification of why they should have your money without doing anything to earn it. Voila! Socialism.
Perhaps you both take me too seriously. I'm commenting on the flip that is occuring and vidy aludes to. Indeed, the "socialists" are calling themselves "capitalists", and fettered actors are accepting the blame for "freely" choosing to drive the economy over a cliff. Yes, it's all very much about incentives. I want to know who incentivised miscreancy and irresponsibility. I think you know who I blame.
I thought this was particularly appropriate:
The Federal Convention of 1787
Saturday July 21rst
Governor Morris: "…The answer was short and conclusive. Either bad laws will be pushed or not. On the latter supposition no check will be wanted. On the former a strong check will be necessary: And this is the proper supposition. Emissions of paper money, largesses to the people – a remission of debts and similar measures, will at some times be popular, and will be pushed for that reason."