Bank bailout recipients' link to deal
It's probably not what the architects of the federal bank bailout intended. Most of the banks that agreed to finance $22 billion of Pfizer Inc.'s proposed $68 billion acquisition of Wyeth received funds from the federal government under its Troubled Asset Relief Program, or TARP.
It's probably not what the architects of the federal bank bailout intended.
Most of the banks that agreed to finance $22 billion of Pfizer Inc.'s proposed $68 billion acquisition of Wyeth received funds from the federal government under its Troubled Asset Relief Program, or TARP.
Now, they are participating in a deal that likely will lead to thousands of job cuts at the combined company.
Morris Segall, president of SPG Trend Advisors, an economic-research firm in Baltimore, said deals like this were "totally anathema to what Congress has in mind."
"Feeding from the public trough for the benefit of corporate America is wrong," he added. "It's just plain wrong."
Bloomberg reported that the banks financing the deal - Morgan Stanley and Evercore Partners Inc. for Wyeth, and Bank of America, Goldman Sachs, JPMorgan Chase & Co., Barclays P.L.C. and Citigroup Inc. for Pfizer - would reap $207 million in fees for arranging the takeover.
Evercore, a boutique investment-banking firm, and Barclays, a British financial firm, did not receive U.S. aid. The others have received $135 billion in TARP money.
The Treasury Department said last week that so far it has invested about $194 billion to prop up the banking industry through its TARP. Its goal is to stimulate bank lending and, in turn, the economy. Layoffs detract from that goal.
But some finance experts said they didn't think the government should intervene.
"In terms of the size of lending or the type of lending, I would hate to see the government get involved in that," University of Pennsylvania finance professor Richard Marston said. "You can imagine all the abuses that would occur."
He said he was more concerned that taxpayers get a return on their investment once stability returned to the banking sector. He also said he supported some government oversight of banks, such as the ability to limit corporate bonuses.
Karl S. Okamoto, director of business and entrepreneurship law at Drexel University, said government intervention in business decisions damaged economies.
"Invariably," he said, heavy-handed intervention "leads to economic harm by forcing market actors to take noneconomic steps to comply with the government's indirect efforts at preserving jobs. Europe suffered for decades under these kinds of policies."
