Paulson Plan Aimed at Helping `Poorly Run’ Banks

September 25, 2008 by · Leave a Comment
Filed under: Industry News 

Ain’t this the truth. Just like when I was talking to a mortgage broker friend and he said he could get me an adjustable rate mortgage loan and said you could chance it and re-fi but he also told me that the market is running out of gas and it would not be in me best interest. What did I do? I didn’t take it and continued to rent even when all my friends were getting home around me and calling me stupid not to jump in. They should not be bailed out just like I would not want to be bailed out. If you make a decision and it turns out to be a bad one you should not expect to bailed out because it didn’t got the way you thought. If your broker said real estate always goes up and you believed him and didn’t take time to use your own brain then it serves you right. If you don’t penalize this type of group think then next time some product like this comes along then people will do the same thing because they were taught that no matter what you do the government will be there to be your backstop. That makes people complacent and teaches them to follow trends and not actually use an analytical process to determine if this is the correct course of action for their situation.

News Article:

U.S. Treasury Secretary Henry Paulson’s proposed $700 billion bank rescue aims to help “poorly run” companies and the primary beneficiaries would be Goldman Sachs Group Inc. and Morgan Stanley, said BB&T Corp. Chief Executive Officer John Allison in a critique of the plan.

Treasury “is totally dominated by Wall Street investment bankers” and “cannot be relied on to objectively assess” the impact of government policy on the financial industry, Allison wrote in a Sept. 23 letter to Congress. The letter was verified by Bob Denham, a spokesman for BB&T, North Carolina’s third- largest bank.

Allison, 60, said Congress should “hear from well-run financial institutions” as lawmakers consider the plan, which seeks to ease the credit crunch by buying troubled mortgage- related assets. Under Allison, Winston-Salem, North Carolina- based BB&T avoided the subprime mortgage market, whose collapse led to the credit crisis. BB&T has risen 26 percent this year, the best showing in the 24-company KBW Bank Index.

The BB&T chief’s rebuke to the Paulson plan may be unique among U.S. regional banks. While lenders such as New Jersey’s Hudson City Bancorp and Minnesota’s U.S. Bancorp also have said they kept lending standards intact and avoided making highly leveraged loans, few have publicly opposed the bailout plan.

The American Bankers Association, the industry’s trade group, has urged members to lobby against “rash actions” including bankruptcy reform and new regulations that will hurt community banks. Members of the Washington-based group have taken various positions on the Treasury plan, both pro and con, spokesman Peter Garuccio said. He wasn’t aware of any letters from members similar to Allison’s. Spokespersons at U.S. Bancorp and Hudson City didn’t immediately return calls today.

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