Tuesday, February 17, 2009

Should Bail Out Money Fund Large Mergers?

In a letter to U.S. Attorney General Eric Holder, the American Antitrust Institute urges federal regulators to take a hard look at the Pfizer-Wyeth merger. One ground for concern is typical. The two companies are said to have competitive overlaps in anti-depressant treatment drugs and animal health pharmaceutical products, including vaccines, parasite controls, and growth implants. If the merger goes forward, those who need these sorts of pharmaceutical products could face higher prices. But the solution would be a relatively straight-forward divestiture of one company's product line whenever an overlap exists.
The second, and more intriguing ground for AAI's opposition to the merger is that it is being funded in part by banks that received federal bail out money. A consortium of banks, including Goldman Sachs, JP Morgan Chase, Citigroup, and Bank of American are said to have committed $22.4 billion in debt toward the $68 billion transaction. According to the AAI report, these banks have received cash injections of $95 billion and another $345 billion in credit guarantees from the federal government. AAI argues that this federal assistance has enabled the banks to provide the marginal funding necessary for this transaction. That assistance, however, was intended to stimulate lending that would alleviate the credit crunch and thereby stimulate the economy. Funding the Pfizer-Wyeth merger, AAI contends, has the primary effect of handsomely rewarding shareholders, many of whom are extremely wealthy already, while providing little real economic stimulus. If committing so much debt to fund this merger crowds out loans that would otherwise go to build new plants, conduct research and development, maintain needed inventory, and the like, federal taxpayers could end up funding an investment windfall for shareholders rather than stimulating the economy.
Fittingly, a Wyeth spokesperson contacted about the AAI report replied, "The transaction is a compelling one for Wyeth shareholders that is in their best interests."


Anonymous said...

I want to emphasize the indecency of 20,000 jobs that will be lost as a result of a merger fueled by TARP funds -- funds that were forcibly taken out of the taxpayer's pockets to supposedly stop home and job losses! Is it not time to call this for what it really is - shameless exploitation of the country's honest workers? At the very least these leeches need to be forced to find money to fuel such projects elsewhere and not allowed to use bailout money.

corporatebully said...

RBC Bank President Gordon Nixon - Salary $11.73 Million


I'm a commercial fisherman fighting the Royal Bank of Canada (RBC Bank) over a $100,000 loan mistake. I lost my home, fishing vessel and equipment. Help me fight this corporate bully by closing your RBC Bank account.

There was no monthly interest payment date or amount of interest payable per month on my loan agreement. Date of first installment payment (Principal + interest) is approximately 1 year from the signing of my contract.
Demand loan agreements signed by other fishermen around the same time disclosed monthly interest payment dates and interest amounts payable per month.The lending policy for fishermen did change at RBC from one payment (principal + interest) per year for fishing loans to principal paid yearly with interest paid monthly. This lending practice was in place when I approached RBC.
Only problem is the loans officer was a replacement who wasn't familiar with these type of loans. She never informed me verbally or in writing about this new criteria.

Phone or e-mail:
RBC President, Gordon Nixon, Toronto (416)974-6415
RBC Vice President, Sales, Anne Lockie, Toronto (416)974-6821
RBC President, Atlantic Provinces, Greg Grice (902)421-8112 mail to:greg.grice@rbc.com
RBC Manager, Cape Breton/Eastern Nova Scotia, Jerry Rankin (902)567-8600
RBC Vice President, Atlantic Provinces, Brian Conway (902)491-4302 mail to:brian.conway@rbc.com
RBC Vice President, Halifax Region, Tammy Holland (902)421-8112 mail to:tammy.holland@rbc.com
RBC Senior Manager, Media & Public Relations, Beja Rodeck (416)974-5506 mail to:beja.rodeck@rbc.com
RBC Ombudsman, Wendy Knight, Toronto, Ontario 1-800-769-2542 mail to:ombudsman@rbc.com
Ombudsman for Banking Services & Investments, JoAnne Olafson, Toronto, 1-888-451-4519 mail to:ombudsman@obsi.ca





"Fighting the Royal Bank of Canada (RBC Bank) one customer at a time"