Just in case you did not understand lastime!

Ok Ok so you did not follow yesterdays post on the bailout. Let's try it one more time and I will keep it simple.

Case in Point: Bank of America

1) The government gives Bank Of America 25 billion dollars and says go forth and lend. Being prudent bankers, they are not about to loan that money to anybody. After all they may not pay it back.
2) B of A now has $25 Bil. burning a hole in it's pocket, and goes looking for a bargain to buy. Yes this is the same money they were supposed to be lending to their customers.
3) Merrill Lynch is in trouble because of poor business practices and can be bought for a mere $50 billion.
4) B of A knows a good deal when they see one, so they buy Merrill. I mean in reality who could resist, that Merrill logo of a big raging bull is really cool.
Now don't get the wrong idea, B of A did not take the check Uncle Sam gave them and write their own check to buy Merrill. After all they were still 25 billion short right. No like any good company they just issued more shares and exchanged those shares for Merrill shares, so they got Merrill and still have the 25 billion we gave them. Now that is one smart deal.
5) The deal closes 12/31/08. Somebody deserves a big bonus!
6) January 14, oops we did not look at Merrill close enough. Turns out in the last 14 days we have discovered they are losers.
7) Hello Uncle Sam, can you please send us a few more billion dollars, we are a little short. We need to keep that balance sheet strong.
8) Uncle Sam says sure, we got your back on this deal, who could have seen this coming. You guys sorta messed up here so somebody needs to be punished, at least a little.
9) B of A says sure, we understand. How about we all keep our year end bonuses but we cut the dividend of all of our unsuspecting stockholders by 50%?
10) Uncle Sam says, it really hurts me to get tuff, but we must. That dividend reduction may not be enough punishment, you acted irresponsibly.
11) B of A says we understand we are willing to sacrifice more in the way of dividends to our stockholders if we have to. We understand somebody must be made to pay.
12) Uncle Sam says, call me if you need more, my pocket is always open!

I am sure no in the government or anyone at Bank of America sees it this way. I am sure both would say this is way to simplistic, and that I just don't understand. I will confess that I truly do not understand, do you?

All I know, is if the president of B of A or somebody from the Treasury had to got to Mrs. Jones 3rd grade class and explain this deal, and he wasn't directly involved - -I think explain it like I just did.

Buy the way, the porn industry has a lobbyist asking for several billions to save jobs in that industry. I am sure that in Washington it will sound perfectly reasonable, and may even be considered.

I just think if you can't justify it to a 3rd grader, it may not be a good deal for the taxpayers.