CBS News: Where Did The Bailout Billions Really Go?

In October, the federal government gave Bank of America and Merrill Lynch a combined $25 billion in bailout funds. According to the Wall Street Journal, the move was designed "to keep money flowing through the financial system, ensuring that banks continue lending to companies, consumers and each other." (1) Unfortunately for the taxpayers footing the bill, Bank of America appears to have had another agenda.

The other day, CBS News investigative correspondent Sharyl Attkisson reported the following:

"Once the bill became law on October 3, Henry Paulson's Treasury Department moved quickly on an entirely different front: Give bailout money to select banks to help them buy competitors."

According to the report, Paulson did not discuss this strategy in advance in his conversations with important members of Congress.

The report goes on to note that Bank of America "received $15 billion dollars and bought Merrill Lynch, which got $10 billion even as it was up for sale."

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As we note in our own report, even though Bank of America claimed that it did not use bailout funds to invest in healthy banks, just three weeks after receiving the bailout money, BofA invested $7 billion of it in China Construction Bank Corp. - a foreign bank with no presence in the U.S.

Morningstar Inc. analyst Jaime Peters noted at the time, "This is falling closely on the heels of their receiving [bailout] money, which was intended to spur lending in the U.S. or have bigger, stronger banks buy the failing banks...But neither of these things is happening." (2)

The CBS News article mentioned above also noted that, this week, "congressional leaders...said no further bailout money will be given to Treasury without much stricter conditions."