Banking Law

When we discussed the potential positive effects of Visa's announced intention to engage in a public stock offering fourteen months ago, we didn't list one that since that time has become its biggest apparent benefit: boosting Visa member banks' capital.

At least $10 billion of it, and perhaps more than $12 billion, will be used to buy back their own Class B and Class C shares from major shareholders ? the banks. ?It?s a great way for the banks to raise money,? says Francis Gaskins, CEO of IPOdesktop.com. ?It?s pretty transparent.?

The biggest holder of Class B shares is J.P. Morgan Chase, one of the underwriters; it currently has 93.1 million in Class B shares, but will own 64.5 million in Class B shares after the offering. Other major stakeholders include U.S. Bancorp, Citigroup and National City, and it?s not a stretch to say the banks won?t look askance at a big infusion of capital right around now.

According to Visa's S-1, the remainder of the estimated $15.6 billion to $17.1 billion raised will be used to settle litigation (including the litigation we discussed here and here), and deposited in a $3 billion escrow fund. Obviously, Visa has heard class action attorneys screaming "Show me the money!" and has chosen to respond.

As to the banks, they can use every billion or so they can get their hands on these days. Thankfully, none of the money will be spent on growing existing business operations, investing in new ventures, improving technology, or other mundane purposes. No, it's going to fulfill the greater good: lining the pockets of big banks and trial lawyers.

I ask again: Is this a great country, or what? Excuse me while I grab a hankie and wipe away a little tear of pride and joy.