Obamanomics May Not Be Over

Rumor has it that JP Morgan may make a bid to take over Bank of America, backed up by $100,000,000,000 of government money. In order for the deal to go through, the SEC would have to suspend antitrust rules, becasue the resulting entity would have too large a market share under current regulations. Recall that in early 2009, BofA used $45 billion of government money to buy out Merrill Lynch and a bunch of other TARP loans.

The precedent was set a long time ago for the government to lend money to private companies when the failure of those companies would have a significant impact on the national economy as a whole. But this is literally doubling down on failure. At some point, will this experiment in public bankrolling of private financial adventuring be called a failure? I’m not saying I wouldn’t like a helping hand if I were to fall down on my luck. I’m saying that maybe the public isn’t well served by this sort of thing.

If BofA is really that financially distressed, one of its competitors will offer to buy it out at a bargain price. Some stockholders will lose, others will win, and chances are that the same mutual funds will be owners of both stocks. There is no need for this level of government involvement in what amounts to a hostile takeover of a troubled company.

EDIT —  On further consideration, I think I’ve improvidently titled the post. Bush this did sort of thing too.

Burt Likko

Pseudonymous Portlander. Homebrewer. Atheist. Recovering litigator. Recovering Republican. Recovering Catholic. Recovering divorcé. Recovering Former Editor-in-Chief of Ordinary Times. House Likko's Words: Scite Verum. Colite Iusticia. Vivere Con Gaudium.


  1. IIRC correctly, Bank of America’s offer to purchase the ailing Merrill, Lynch antedated the enactment of the TARP program and was described in the media as a ‘stock-only’ transaction. Bank of America had second thoughts in late 2008 when it had done a more thorough review of the Merril Lynch balance sheet but was persuaded to continue with the deal by Messrs Paulson, Bernanke, & Geithner. The way the newspapers described it, some sort of threat was incorporated into that persuasion.

Comments are closed.