John Hinderaker has spotted a trend and we think it’s a long time coming. Financial firms and businesses, even one’s in trouble, but especially those that are not, are quickly discovering that government funds come with strings, and the rules can change (and often do) in the middle of the game.
Bank of America CEO Ken Lewis now says that taking $20 billion from the federal government to support BoA’s acquisition of Merrill Lynch was a “tactical mistake.” Lewis says he expects BoA to repay the $45 billion it owes the government over the next two to three years.
Uhh, yeah … and one of my former brothers on the street says they are not the only one … and reminded me of this … when JP Morgan cut its dividend last week by 87%.
The savings from cutting the dividend will put the bank in a position to pay back more quickly the $25 billion it took from the government last fall under the Troubled Asset Relief Program. J.P. Morgan has said it was encouraged to take the money and didn’t need it.
They realize what you soon will if you agree to mortgage cash, or federal health care … nothing comes for free and everything they do has strings and rules can change in the middle of the game.