It has been widely reported that Treasury Secretary Hank Paulson and Fed chief Ben Bernanke summoned the CEOs of America’s nine largest financial institutions to a meeting on October 13, 2008, at which they were told that their banks would be required to accept TARP money and give the federal government an ownership interest in their institutions, whether they wanted to do so or not. We have it on good authority that some of the bankers, at least, were told that they would not be allowed to leave the room until they signed documents that were presented to them at that meeting.
These chilling reports have now been confirmed by Treasury documents that were obtained by Judicial Watch through a FOIA request. These were Paulson and Bernanke’s “talking points” for the meeting. Click to enlarge:
The document is unambiguous: “We plan to announce the program tomorrow–and–that your nine firms will be the initial participants. … This is a combined program (bank liability guarantee and capital purchase). Your firms need to agree to both. We don’t believe it is tenable to opt out because doing so would leave you vulnerable and exposed. If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance.” So the regulators’ independence had already been compromised.
Note that these “talking points” also document Treasury’s willingness to misrepresent the condition of some of the financial institutions to the American people: “We will state clearly that you are healthy institutions, participating in order to support the U.S. economy.” That was certainly not true as to Merrill Lynch. But shortly thereafter, when Bank of America realized that Merrill Lynch’s condition was deteriorating rapidly and tried to back out of its purchase of that company, Treasury bullied BoA into going through with the deal by threatening to fire the bank’s entire Board of Directors–a move that transferred tens of billions of dollars of wealth from BoA shareholders to Merrill Lynch shareholders.
The Judicial Watch documents also shed some light on the administration’s effort to run interference with conservatives who objected to the partial nationalization of the banks. This email thread discusses Paulson’s communications with the Obama and McCain campaigns. Douglas Holtz-Eakin, who was trying to “back down the ‘they are nationalizing the banks’ crowd,” was John McCain’s senior economic adviser. Meanwhile, Ed Gillespie, a respected Republican operative who was a senior White House official at the time, was trying to neutralize Ed Feulner, President of the Heritage Foundation. Click to enlarge:
This October 13 meeting strikes me as the moment when the federal government crossed the Rubicon and embarked on a lawless, unconstitutional attempt to dominate the nation’s financial sector. This occurred in the dying days of the Bush administration, but it laid the foundation for Barack Obama’s ongoing attempt to assert national socialist-style dominance over much of our economy.