The biggest spur to deal-making among banks isn’t private-equity cash or foreign investors. It is the federal government.
To encourage banks to pick through the wreckage of their collapsed competitors, the Federal Deposit Insurance Corp. has agreed to assume most of the risk on $80 billion in loans and other assets. The agency expects it will eventually have to cover $14 billion in future losses on deals cut so far. The initiative amounts to a subsidy for dozens of hand-picked banks.
And this is good for the taxpayer how?
Possibly the taxpayers will make money on the deal.
There was a report the other day that something like six of the largest banks that had received bailout loans have repaid the loans and that the treasury made a $48 billion profit.
There was another report a few days earlier about a bank that had paid bonuses with toxic assets–a really neat idea I thought. Turned out that the recipients were able to make a substantial amount of money by selling the assets.
New York Times:[url=http://www.nytimes.com/2009/08/31/business/economy/31taxpayer.html?_r=1&ref=politics]As Banks Repay Bailout Money, U.S. Sees a Profit[/url]