Thursday, May 14, 2009

Paulson Told Bankers They Had No Choice, Really.

Long before the current contingent arrived from Chicago, Washington D.C. was already a gangsta land. Or it sure seems that way. According to article, "Paulson Told Bankers to Take U.S. Taxpayer Aid or Be 'Exposed'",

"Former Treasury Secretary Henry Paulson, saying nine U.S. banks were “central to any solution” of the credit crisis, told their leaders to take government aid or be forced to by regulators, according to a memo prepared for an October meeting."

That October meeting took place on Monday October 13, 2008. The memo was obtained by Judicial Watch, a nonprofit research group in Washington that obtained the documents under a Freedom of Information Act request.

The stock market went off the cliff on Wednesday October 1, the very day that Senate passed the Emergency Economic Stabilization Act of 2008, a.k.a. Bailout of Financial Institutions. It kept falling, and on Friday October 10 the market hit the then-bottom of 7,883 on Dow Jones Industrial Average.

In that panic situation, Paulson told the bankers:

"“If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance,” Paulson’s one-page list of talking points for the session with the banks’ chief executives said. “We don’t believe it is tenable to opt out because doing so would leave you vulnerable and exposed.”

"Three and a half hours after the meeting was scheduled to begin, Paulson had obtained the bankers’ signatures on half-page forms along with the handwritten amount of the federal government’s investment, according to the documents. He announced the actions publicly the next day."

I read before that Paulson on that day told the bankers they wouldn't be able to leave the room until they sign the form. I always wondered why none of them took up an offer, so to speak, and stayed on. Wells Fargo CEO was reported to be vehemently opposing the idea, saying his bank did not want any government money.

Now I know. Even if they said no, Treasury would force-feed them anyway. Head I win, tail you lose.


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