One of the reasons the bailouts of US banks were so insidious was that they were politically tainted. They weren't bailouts, they were paybacks.
It's no secret that Goldman Sachs, Citigroup, Morgan Stanley, JP Morgan, Bank of America and Merill Lynch played lots of politics and gave massive campaign contributions. You can read more details of that here.
Now to confirm that, we have a University of Michigan study showing that banks with strong political connections were more likely to get bailout money than those that did not have them. They money they received was related to their political contributions and lobbying expenditure.
Political influence was measured by four variables: how many seats held by bank executives on the board of directors at any of the 12 Federal Reserve banks or their branches; banks with headquarters located in the district of someone serving on the Congressional Committee on Financial Services or its subcommittees on Financial Institutions and Capital Markets; banks' campaign contributions to congressional candidates; and banks' lobbying expenditures.
The study found that if a bank was connected to a congressman on a key financial services committee, they had a 26% higher chance of getting a bailout.
That was regardless of whether they deserved it or not. As one of the researchers Denis Sosyura says: "The effects of political ties on federal capital investment are strongest for companies with weaker fundamentals, lower liquidity and poorer performance – which suggests that political ties shift capital allocation towards underperforming institutions."
What this study shows is that the bailouts were basically corrupt.
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