QOD

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1. X Stryker says:

   February 11, 2009 at 2:49 pm

   They can’t pay out dividends if they take a loss, right? So I assume you mean the ones that make a profit. In that case, wouldn’t the government get dividends too? Through TARP, they bought preferred stock, if I’m not mistaken.

   If the government makes revenue for TARP, is that good or bad?

2. jason330 says:

   February 11, 2009 at 2:51 pm

   Because they never needed the TARP money in the first place:

   Ken Lewis, CEO, Bank of America:

   I actually agree. I know at the time we did not feel like we needed the 15 billion. But I think in light of the severity of the recession, and in light of the speed at which the economy deteriorated, I think we have lent more money because we had the TARP funds and that level of capital.

3. Unstable Isotope says:

   February 11, 2009 at 3:02 pm

   They’re paying dividends because they want people to buy their stock.

4. Brian Shields says:

   February 11, 2009 at 3:08 pm

   Why do companies that take TARP funds have investors? I’m pretty sure I would have cut my losses and looked for a more stable investment by now.

5. cassandra_m says:

   February 11, 2009 at 3:11 pm

   They keep dividends as a way to maintain some value in their stocks.

6. Phantom says:

   February 11, 2009 at 3:18 pm

   Basically because they want more layoffs and investing back into the company wouldn’t make any sense b/c the leadership of these companies only know how to drive them off a cliff. So we might as well keep bribing our larger shareholders to go down with us.

7. Rebuild the Delaware GOP says:

   February 11, 2009 at 3:34 pm

   Why did President Obama lie to voters about capital gains cuts?

   http://www.ncpa.org/sub/dpd/index.php?Article_ID=17562

8. X Stryker says:

   February 11, 2009 at 3:36 pm

   Brian, the TARP funds went to all of the major banks, regardless of whether or not they needed it. More was then subsequently given to the ones who really needed it, and those guys probably shouldn’t be paying dividends. But the reason Paulson gave the cash to the healthier banks as well is because only the healthy banks were going to be able to thaw out the credit freeze. Failing banks like Citi won’t expand lending no matter how much you give them, because they’re falling apart.

   Not that I’m necessarily agreeing with the TARP strategy, but the purpose was actually twofold – give money to bad banks to prevent a catastrophic collapse, and give money to healthier banks so all the other companies and small businesses have someone to lend them what the troubled banks can’t.

9. X Stryker says:

   February 11, 2009 at 3:40 pm

   A better question, as always, is “Why is Mike Protack lying to Delaware?”

   Just because Obama promises something doesn’t mean he has to put it into the current stimulus package.

   You notice Republicans practically piss themselves over how the stimulus will add to the deficit, but then they tell you that Obama should make it more expensive with ineffective tax cuts.

   Businesses that are losing money aren’t paying capital gains taxes, dumbass!

10. Phantom says:

    February 11, 2009 at 3:43 pm

    Why does the GOP lie about everything in creation?

11. cassandra_m says:

    February 11, 2009 at 3:46 pm

    X, Protack’s link is ultimately sourced to a WSJ editorial. They’ve taken a campaign proposal to review some capital gains tax cuts for small businesses and are now demanding why they aren’t in the stimulus package. Even if a small capital gains cut is included in the Senate version. It is another way of plumping for tax cuts to their audience who thinks that they cure everything.

12. cassandra_m says:

    February 11, 2009 at 3:46 pm

    Because they can, Phantom.

    Who will call them on it, really?

13. Donhusseinsquishviti says:

    February 11, 2009 at 4:08 pm

    Why does the GOP lie about everything in creation?

    snarkier quote for you…

    the gop EVEN lies about creation

14. Not Brian says:

    February 11, 2009 at 10:29 pm

    “Why are companies that are recieving TARP money still paying out dividends?” – Donsquishivomitonmyporch

    There should be a distinction drawn between firms that have taken bailout money and the capital infusion that came at the beginning of TARP.

    They sat the CEOs of the biggest banks in the country around a table and told them they were all going to take ~$24 Billion each from TARP 1. The Fed under Paulson did this in order to strengthen the confidence in banks and to not have any single institution get singled out as needing assistance. The terms were a sweetheart deal so firms like JP Morgan take the cash eve though at the time they did not require capital. It was a stupid plan that wasted resources by spreading them around to healthier banks.

    Those banks should be able to do whatever they want.

    Citi and B of A have required capital from the Fed, the TARP, and loss guarantees from the Fed and Treasury… they should be nationalized and broken up or restricted from paying dividends… we are handing them capital an they are paying cash to their shareholders that will be a loss to taxpayers if they become insolvent.

    “They can’t pay out dividends if they take a loss, right?” – X

    Sure can, but it reduces their cash on hand. Since they are having issues raising capital, every cent they pay in dividends is bleeding off capital. Companies pay dividends in theory to distribute cash to shareholders that is in excess of what they can re-invest into the business profitably.

    In reality they use it increase the share price by making it a more attractive investment. It provides a return to the shareholder that they could use as income or to reinvest. When a company is generating cash in excess of what they can invest effectively they generally invest it anyway. The generally continue to pay the dividend through challenging earnings so as not to further impact share prices.

    Lets say you have a $1MM of a stock that has a 2% dividend yield, you will get $20K in cash a year in dividends… lets say that stock is citi and the stock drops in value to $200,000 and they continue the dividend… now it is a 10% yield… the stock has lost 80%… take away the $20K a year return on the dividend and the stock would crater…

    But it should. Citi (and probably B of A) are essentially insolvent – even with the capital infusions and backstop on losses (and their portion of the $2.5 trillion in lending the Fed has done taking the toxic assets as collateral). We are basically allowing institutions (that should be dissolved in an orderly fashion) to lose money and stress the financial system and the governments resources. All the while allowing them to distribute the funds we are using to support them back to investors (who are supposedly the ones bear the risk of the investment).

    ‘Why did President Obama lie to voters about capital gains cuts?’ – Pornstache

    You have to be kidding. Not only is it irrelevant to this thread, the multiplier effects of a cap gains tax cut as stimulus do not compare to tax cuts for individuals with moderate to low incomes. Even then the tax breaks lose to direct spending when it comes to stimulating
    GDP growth.

    Not that a partisan hack would let economics get in the way of the party line…