PEEK

How Fumbling the Bailout Led to the Chicago Sit In

Bank of America could have kept Republic Windows open if they hadn't been distracted buying up their competitors.
Over the last couple months I've warned that one main reason banks aren't lending, and are cutting off credit lines to businesses and individuals, is because they are hoarding money in order to buy competitors. In the Chicago factory sit in, the key moment which caused Republic Windows to shut down was when Bank of America cut off their line of credit, which they did just before they approved a $50 billion takeover of Merrill Lynch.

Bank of America has bought out LaSalle Bank and Countrywide, and bank shareholders just approved a $50 billion buyout of Merrill Lynch. B of A has recently settled the largest suit against Countrywide.

Meanwhile, according to a source familiar with the nature of the bank's finances, Bank of America has issued $9 billion of secured debt insured by the FDIC. Yet, as with almost all banks, it has been tightening its credit to businesses and consumers.

A lot of banks still have plenty of money. Bank of America has plenty of money. The amount of money required to keep Republic Windows open is trivial to them -- $10 million, perhaps.

But right now, they as with other banks, are keeping their powder dry. Money loaned out can't be used to buy up competitors at cents on the dollar.

Ian Welsh is the managing editor of The Agonist and a sometime contributor to FDL and the Huffington Post.
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