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My Kingdom for a Troubled Asset!

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Being a consummate nerd, when driving I often listen to WTOP radio [2] 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.

Here’s the Bloomberg report [3]:

Genworth Financial in Talks to Buy InterBank, Tap Into Program

By James Callan  
      
 
 

      

Nov. 16 (Bloomberg) — Genworth Financial Inc. [4], 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 [5] 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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