Saturday, August 08, 2009
Bank officials are at it again. Having survived last year’s financial meltdown—in large part because of the federal bailout program—many of the nation’s biggest financial institutions are once again offering high-risk opportunities to investors, while also taking advantage of Americans struggling with their paycheck-to-paycheck lives.
Bank of America, Citigroup, and JPMorgan Chase have recently put together new credit lines for corporations that are linked to derivatives, the volatile investments that played a big part in the 2008 crisis. For BofA and Citigroup, the moves are especially disturbing, given that both institutions are still trying to regain their pre-2008 strength, and have multi-billion dollar obligations to the U.S. Treasury.
Other banks like Wells Fargo and Fifth Third are offering high-interest payday-loan programs to struggling consumers, and still other institutions are marketing “structured notes” to small investors that carry their own risks.
These moves have regulators, lawmakers, and consumer advocates nervous that banks are setting themselves, and others, up for more financial trouble if the economy sours.
-Noel Brinkerhoff
Old Banks, New Lending Tricks (by Jessica Silver-Greenberg, Theo Francis and Ben Levisohn, Business Week)
Comments