Musing on the word 'bailout'

Dominic Ng, the president, CEO and chairman of East-West Bancorp Inc., had an interesting take on the semantics of "bailout" versus "rescue."

Basically, one man's "rescue" is another's bailout.

In a recent conversation on a story I was doing about his Pasadena-based bank's application for $316 million in funds from the Treasury's Troubled Assets Relief Program, he said what many, including myself, call a "bailout" of the banking industry is misplaced wording.

The program, in which the Treasury is injecting up to $250 billion into the nation's banks, is actually an investment, he said, because the government will ultimately "make a killing" off the preferred stocks it has purchased in these banks -- which are among the relatively healthiest around.

He said he understands how it can be perceived as unfair that the government is "bailing" out banks rather than homeowners.

But in effect, the injections of federal money into banks will ultimately calm the market, he said.

"The confusion is that people think that the Treasury is spending money to rescue these banks, instead of just investing at the right time," he said. "It seems like the administration is bailing people out..."

But it's truly a "bailout" when that money can't grow, he said. When the economy emerges from the doldrums, the government -- and hence the taxpayers -- will get a nice return, he said.