Banks to Use Half Their Bailout Bucks to Pay Dividends

Critics: Cash was meant to spark lending
By Jim O'Neill,  Newser User
Posted Oct 30, 2008 5:59 AM CDT
Sen. Charles Schumer, D-N.Y., wants banks who get federal bailout funds to suspend dividends.   (AP Photo/Susan Walsh)
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(Newser) – At least half the $163 billion banks are getting from the Treasury Department to shore up balance sheets and spur lending will be paid to shareholders as dividends over the next 3 years, reports the Washington Post. That’s raised the ire of members of Congress and some economists, who say if banks have enough cash to pay dividends, they shouldn’t be taking public funds.

Treasury officials say attaching too many strings would have made banks leery of taking part in the program, while analysts say cutting dividends will deter new investors, making it harder for banks to expand. Sen. Charles Schumer called for a suspension of dividend payments, as has been done in Britain and Germany. "The whole purpose of the program is to increase lending and inject capital into Main Street,” he said. Some 33 banks took bailout cash and will pay at least $7 billion in dividends this quarter alone.