I figured that most of the CARES Act money would find its way into the pockets of the bankers eventually.
Here in Montana, that’s exactly what’s happening. The largest expenditure to date will go to banks, $125 million. This is a huge handout, and all the banks have to do is...nothing.
You see, small businesses that have bank loans now can take a year-long break from paying on those loans. What’s more, no interest will accrue on those loans.
But that’s not quite accurate. Interest will be accruing, but Bullock will use the money the feds gave him to pay that to the banks.
He and the banks hammered out the details behind closed doors.
This is a huge windfall for the banks. The banks can get up to $150,000 for each loan that isn’t being paid. The catch here is that when those small businesses start paying on those loans again in a year, the principle will be exactly the same.
In other words, the bank will make the exact same $150,000 in interest payments again.
What a deal!
Montana banks are getting $125 million in free money and all they have to do is sit on their hands for a year. When that year is done, they’ll make another $125 million on all the loan interest that still has to be paid!
Of course, a year from now many of these businesses will probably be out of business and the loans will be junk. Hence the bailout now.
Here’s another look at the story, though both sources just copy-paste the governor’s press release.
I think the bailout idea is the wrong approach, and rewards the wrong actors.
Another option would be to direct the $150,000 to the small business and not the bank, allowing that business to pay that money towards the loan and the interest on the loan.
This not only helps the business by allowing them to keep paying on the loan, perhaps even paying it off early, but it also helps the bank by ensuring they’ll keep getting those payments and not a default.
That type of arrangement benefits both parties...but the banks resent this. Greed rules their mindset.
Instead of the bank and the business benefiting, the bank takes it all, and then a year from now they’ll demand more.
This is the ‘run-amok’ of our capitalist system, and our politicians support it. They know who holds the purse-strings.
I’m saddened that our Montana banks have chosen greed over supporting their communities, but I’m not surprised by it.