The U.S. Treasury Department’s $250 billion plan to buy stock in banks–aka the voluntary Capital Purchase Program–hit home yesterday when Dallas-based Comerica Inc. announced preliminary approval for its piece of the pie: $2.25 billion. The fresh cash should raise Comerica’s “Tier 1 capital ratio”–that’s a measure of how strong the bank is financially–from about 7.35 percent to 10.35 percent; anything above 6 percent means a bank is nicely capitalized. So the question arises: Why are taxpayers pumping all these billions into banks that are doing just fine without the federal largesse? Spokesman Wayne J. Mielke says Comerica went for the deal because the Treasury’s terms are “low-cost” and “reasonable and attractive,” and will help the bank make more loans in growth markets. Can’t argue with the logic. And, what sane person would turn down free money?
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The answer is simple: To buy out weaker competitors. What? You really thought this tax-funded government handout was going to be used as intended?
http://www.ajc.com/dolphins/content/business/stories/2008/10/27/suntrust_stock_treasury.html
Well, let’s see: we have some loans at Comerica. Does this mean I can ask them for a more competitive interest rate on the loans because, after all, I’m sort of like an investor in the bank now?