Sunday, May 25, 2008

ANB: No Bailout for Shareholders?


Arkansas National Bank: Shareholders out of luck?
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When Bear Sterns investment house failed not two months ago, the Federal government came rushing in with taxpayer money to entice a buyer to rescue them. The Feds took over, even telling Bear Sterns shareholders what stock price they were going to be paid by the entity to take over (J.P. Morgan). The stockholders, some of whom were doubtless well-connected folks, bucked it. J.P. Morgan quadrupled its buyout price. The takeover was still a bargain for Morgan because the Feds threw tens of billions of our dollars in to sweeten the deal.

Everybody involved got well, except two groups: 1) former Bear Sterns employees who got turned out of jobs and 2) us little guys in the heartland who paid for it all.

I talked to a beautiful young lady who works for a hedge fund in NY. "The government had to do this rescue, or it would have been a financial disaster" she said. I was not going for it. "The disaster for them is that they would have had to live with the kind of budget we in the heartland make do with every day. It is morally inexcusable to tax families in Arkansas making $35,000 a year so that people near the power-centers making many times that amount can continue their high-rolling".

At any rate, it appears the stockholders of ANB are not going to get the same benefit as those of Bear Sterns. They are losing their money, if my source is correct. This is yet another example of the double standards of our federal government. Once you give in to the principle that government should prevent the failure of some enterprises, or rescue their investors from the consequences, favoritism is unavoidable. Some favored folks benefit from government rescues. For those of us in the heartland, the ANB effort looks more like the hurricane Katrina "effort".

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