WHEN YOU’RE TOO BIG TO BE ALLOWED TO FAIL
(….you’re also too high-maintenance to keep around)

Bank of America’s recent announcement that it would be cutting some 30,000 jobs over the next few years (besides the previous 6,000 ones it cut earlier this year) shows what happens when government largess is misdirected in the form of “bail-out funding”.

Apparently, contrary to conventional wisdom, size….does matter…. because…. when you’re too big to be allowed to fail….you’re also too high-maintenance to keep around.

When the financial crisis hit in 2008, BOA was one of the first big financial institutions to swoop in with its own cash in hand to buy up failing Merrill Lynch and Countrywide Financial, on the cheap, as part of its continuing empire building merger and acquisition strategy. In this instance, however, it either was unaware of, or, from sheer hutzpah, ignored the “poison pill” potentials of both those acquisitions, and thus was soon panhandling for bail-out funding to overcome their effects on its bottom line..

Which raises some interesting questions: If it was so financially capable and cash-fat, why did it receive some $40 Billion in bail-out funds from the government? The only answers that come to mind are….a) Just because it was big, and there, b) It was the government’s way of rewarding it for having stepped up and spent some of its cash to help dampen the negative economic impacts of those two collapsing giants, and c) Because it was part of the government’s knee-jerk panic reaction to the crisis where the possible collapse of another large financial institution was perceived as an economic nightmare of nuclear-winter dimensions. Besides, much like Disney’s –Fantasia, with Mickey Mouse as its sorcerer’s apprentice – the Treasury’s printing presses were running full blast and generating a flood of pretty green-printed paper, so dumping some $40 Billion of it on BOA, was a handy way to get rid of it.

The unintended consequences of all that folderol were that BOA has sat on a hoard of cash (at taxpayer’s expense of course), rather than putting it to useful lending work, while everyone else has had to make do with lean cuisine. So, its job cutting program, to further cut down on expenses, is a sorry way to return the government’s prior favor. Given the level of unemployment today, it amounts to biting the hand that bailed you out.

Well, there is one bit of consolation about all this. The hastily cobbled –Jobs Bill – just sent to Congress by President Obama, which provides for giving businesses tax credits for each new hire they remove from unemployment….won’t apply to BOA.

Such are the rewards of being too big to fail.

CENTURION