Raise your hand if you’re confused.
First, as Congress and the Bush administration were haggling over how to structure an effective Wall Street bailout package, the Treasury Dept. claimed that forcing banks to suspend dividend payments to their shareholders would discourage participation in the voluntary program. So Congress caved, dropping that prohibition. (The compromise: Banks can pay dividends but not raise them.)
Now — as reports are emerging that banks are using enormous chunks of bailout cash to pay out shareholder dividends — the administration is blaming Congress for its failure to stop them.
Edward Lazear, chairman of the White House Council of Economic Advisors, told reporters Thursday that “what we’re trying to do is implement the law as Congress passed the law.”
The law was quite specific on what rules banks had to follow when they get the — when they get the TARP. And I don’t think it’s the proper role of the administration to change the will of Congress.
That’s an answer, but it doesn’t explain well why banks solvent enough to pay billions in dividends to shareholders need a government bailout. The Washington Post reports today that the 33 banks enrolled in the bailout thus far intend to pay out roughly $7 billion in shareholder dividends 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.
Was this what Karl Rove had in mind for his “ownership society?”