Intervention?

I have been itching to write about the financial market bailout but had a lot of considerations so I have been refraining from sharing my point of view until today... Please note that this is my opinion and in no way it reflects the reality of the market.

First of all, the US government's treatment of failing financial institutions in September of this year failed to restore confidence in the financial market and possibly fueled the trading volatility in the equity market. The fed arranged the sale of Bear Stearns to JPMorgan, took over Freddie Mac and Fannie Mae and wiped out these institutions' preferred and equity holders, then the government allowed Lehman Brother to fail without government assistance and turned around the very next day to bailout AIG by extending a $85 billion loan package. Shortly after AIG, the FDIC seized Washington Mutual and threw it into the arms of JPMorgan which made JPMorgan the largest US depository institution. (I thought the reason for the bailout was because these banks are too big to fail, so why are we making them bigger?) The Washington Mutual acquisition by JPMorgan was completed at the expense of unsecured creditors. As if these weren't enough, FDIC orchestrated the Wachovia takeover by Citigroup with government assistance which was later countered by Wells Fargo with no government aid. (FDIC was going to sell Wachovia to Citigroup with government help for $2.2 billion and Wells Fargo offered $15.1 billion to takeover Wachoiva. Wells Fargo must have gotten the valuation right because Citigroup put up a good fight for this transaction)

In addition to failing to provide equal treatment of financial institutions, Congress also passed a $700 billion bailout package without a thoughtful implementation strategy. Treasurer Hank Paulson announced today that the $700 billion package will not be used to purchase toxic assets that was originally intended by Congress. The money will be used to provide additional equity injection to the banks that have not eased lending practices. A few banks have taken advantage of the TARP (troubled asset relief program) to acquire their rivals to make themselves bigger, pay dividends to make the executives richer, and reclassifying their assets by avoiding mark-to-market to make their earnings look better to ensure their bonuses are in tact. Whether these are intended or unintended consequences of government intervention, something needs to be done so that our financial system, corporations, and small business remain solvent and what is left of the taxpayer money from TARP does not go to waste AGAIN.