Gee, and I thought I might be pushing the envelope on September 28 when I expressed concern that the “bailout” with the made-up $700 billion price tag that turned into the pork-loaded “bailout” with the made-up $850 billion price tag “blackmail” (though “extortion” may be the more appropriate word).
It is clear that this is indeed the case, at least twice over. First, there were the threats made by the Treasury Secretary, the President, and the Fed Chairman warning of a banking Armageddon if Congress didn’t pass the bill.
Now there’s clear evidence, reported with stunning casualness by CNBC, that Paulson & Co. threatened the big banks in some way to force them to “accept” Uncle Sam’s preferred equity investments:
Even if they didn’t want it?
Watch the video; the answer is “yes” — thereby ensuring that the government has a stake in all the major banks. Here are key excerpts (all from the video’s first two minutes):
Host Dylan Ratigan: Well we all know that obscene amounts of risk (were) taken inside of the banking system, leaving some banks crippled, some banks frozen, and other banks with huge opportunities.
Uh, many of the banks didn’t want to be tainted with the government bailout funds because they didn’t want to be mistaken for a fool when they actually felt that they were the smart one that didn’t do it.
Well Hank Paulson said “The heck with that.” He stuck all of them with some of the bailout money. And he said “Listen, we’re going to reset the clock here and move forward.” Charlie, how are the banks that felt they basically didn’t commit the crime, as it were, of excess or reckless risk, uh, respond to the fact that even they will be stuck with this capital?
Charlie Gasparino: Well y’know they were all kind of stupid to some extent …..
….. the Treasury Secretary Hank Paulson put all these egos in the room, and basically put guns to their heads, forcing them to take the money to bolster the banking system.
Some of the firms say they didn’t want the cash, but it’s pretty clear that all of them did need to take the cash, given the continued upheaval in the banking system that crushed shares last week of Morgan as well as Goldman Sachs and just about everybody else.
So this is essentially, uh, Dylan, a case where, y’know, you can deny you have any problems. Even the best-capitalized banks have problems. They own this stuff. And Paulson at one point said, “Listen, if you don’t want it, it doesn’t matter, gun to your head, you gotta take it.”
Ratigan: Yeah, whether you think you’re sick or not, you’re taking the medicine.
Gasparino: Because you’re sick anyway.
So what did Paulson threaten to do if they said “no”? (Yes I know he wasn’t holding real guns. Come on now.) We don’t know, but whatever it is, the opening sections of the pork-loaded “bailout” bill with the made-up $850 billion price tag probably gave him the power to make the threats credible.
It was very unsettling to see the two CNBC reporters basically smile and smirk their way through the opening segment of the clip, with what I saw as an air of insufferable “we know it all” arrogance. Further, a larger group including Ratigan and Gasparino all seemed to agree that the solution for jump-starting the economy that Paulson has embarked on is Keynesian, and not supply side oriented. One of the panelists frequently invoked the name of “Andrew” Hamilton when explaining how nationalizing the banks might actually be a good thing.
This “bailout” was originally advertised as being targeted towards troubled loan situations, principally mortgages. Instead, Paulson, Bernanke, and Bush have turned it into a de facto, no good deed goes unpunished (i.e., responsible lending) tool for partial nationalization.
How many Congresspersons, or presidential candidates, thought this was what they were voting for, or that this is what the people wanted? Two weekends ago, I wrote that the whole saga shows that the whole saga proves that Washington doesn’t really care what we think.
Where’s the proof that this was needed?
Where’s the outrage?
Finally, why is the threat element of the story only news on CNBC? The closest thing I could find came from a lightly-carried Associated Press story, which said that:
Executives of the country’s biggest banks were summoned to a remarkable meeting at the Treasury Department on Monday to be briefed on the plan. Paulson basically told the bank CEOs that they had to accept the government stock purchases for the good of the U.S. economy.
________________________ (Fill in your socialist of choice) would be proud, both of the move and the whitewashing that accompanied it.
Here’s a final irony: The page containing the CNBC story has an embedded link to a Bankrate.com column called “Five Money Mistakes Even Smart People Make.”
Mistake Number 5 is “Being out of touch.”
Cross-posted at NewsBusters.org.