05.13
Bloomberg continuing its investigations into exactly what transpired when banks were forced to take what became known as the TARP funds, back in November, 2008.
The Wall Street Journal had already reported that the Sunday shootout in NY had been assertive. That Paulson and Geithner and Bernanke didn’t just ASK the banks to cooperate, but had insinuated that if they didn’t take the money up front, they might not get any later on when they needed it. That was enough for everyone except Wells Fargo.
However, in a FOIA filing in NY this week, it became known that Paulson had been even more assertive: take it now, or we will force you to later. This has many implications.
As I wrote at the time, whenever bankers convene on a Sunday, it is because only the most dire circumstances exist. The entire US banking system at the time really did sit on the edge of a steep precipice, and the only measure available was nationalization of assetts. However, they really couldn’t say that, because it would have upset the already downward trend in lending rates. So they behaved as secretively as they could. This was when Paulson’s famous “Don’t Ask Just Do As We Say” memo to Congress came forth.
Unfortunately, Geithner’s position within the Obama Adminstration hasn’t changed his approach. Still too close to investment firms he must be regulating, too little has been done to avoid the “too big to fail” approach. This may just end up becoming the albatross that weighs against Obama in the next election cycle.
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