$700 Billion Being Used To Make Banks Profitable #2

The US deficit increased to bailout institutions that were gambling with investors' funds and they balk at attaching strings? And homes are still being foreclosed? Only Republicans could justify this! Something is drastically wrong with this process when a Republican President and his appointees exacerbated the economic disaster by ignoring it too long and now dealing with it by rewarding the wealthy, yet again.

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The WP reports:

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Banks to Continue Paying Dividends

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U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years.

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Dollars paid to shareholders don't serve that purpose, but Treasury officials say that suspending quarterly dividend payments would have deterred banks from participating in the voluntary program.

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Critics, including economists and members of Congress, question why banks should get government money if they already have enough money to pay dividends -- or conversely, why banks that need government money are still spending so much on dividends.

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"The whole purpose of the program is to increase lending and inject capital into Main Street. If the money is used for dividends, it defeats the purpose of the program," said Sen. Charles E. Schumer (D-N.Y.), who has called for the government to require a suspension of dividend payments.

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The 33 banks signed up so far plan to pay shareholders about $7 billion this quarter. Companies generally try to pay consistent dividends and, at the present pace, those dividends will consume 52 percent of the Treasury's investment over the initial three-year term.

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The first nine participants were major banks, some running short on capital, that were told by Treasury officials earlier this month to sign on to the program for the good of the country. Their major shareholders are primarily institutional investors, such as pension funds and mutual funds, although a few wealthy individuals hold large stakes, such as Warren Buffett in Wells Fargo and Prince Alwaleed bin Talal in Citigroup.

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Several banks are on pace to pay more in dividends than they get from the government. The Bank of New York Mellon got $3 billion from the government on Tuesday. It will pay out $275 million to shareholders this quarter, and a projected $3.3 billion over the next three years.