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Government Was The Bully (Banks Were Just Weak And Stupid)

|Includes: AIG, BAC, BK, C, GM, Goldman Sachs Group Inc. (GS), JPM, MS, STT, WFC

Written by Jeannette Di Louie, Assistant Editor


There’s a saying that the media thrives on bad news. And I hate to break it to you, but that’s largely true.

As a financial blogger, I would say I thrive on any news that isn’t tired and old. So while the financial and automotive worlds have delivered one piece of drama after another for the last eight months, I’m sick to death of both of them. I truly believe that I would be the happiest person alive if they did nothing but thrive and prosper from now on, and not just because that would mean a turnaround for our economy.

That would make me smile with relief of course, but never having to write about American International Group (NYSE: AIG), Citigroup (NYSE: C), General Motors (NYSE: GM) or Chrysler? Now that would make me ecstatic.

Give me a story about the FDA throwing seemingly trumped up charges against General Mills (NYSE: GIS) and I’m a happy camper, even if I am a big Cheerios fan and wish the larger company all the best. But it’s new, it’s exciting, it hasn’t been reported five billion times already.

That I saw at least, there were no more Cheerios updates today, nor any non-financial or automotive related scandals to report. But I have to say that the title featured on my Yahoo page intrigued me all the same… even if it did have one of the aforementioned words-not-to-be-spoken it.

Paulson Forced 9 Bank CEOs Into Bailout,” it practically screamed for my attention. Can you blame me for opening it?

Bad Government. Bad!

According to government documents obtained and released by Judicial Watch, a nonpartisan educational foundation, former Treasury Secretary Henry did in fact give nine of the largest U.S. banks no choice in accepting money from the Treasury back in October.

Hosted by Paulson, Federal Reserve Chairman Ben Bernanke, Federal Deposit Insurance Corp. Chairman Sheila Bair and current Treasury chief Timothy Geithner who at the time was only president of the New York Fed, the meeting involved coercive measures in which bank representatives were told they had to accept the government investments “in any circumstance.” No ifs, ands or buts about it.

Treasury Secretary Timothy Geithner’s office didn’t respond to requests for comment, adding further guilt to the already existing evidence.

Personally, I’m not sure what troubles me more: That the government under George W. Bush abused its power in forcing companies to bow to its will in the first place or that after being forced to take the money, financials were raked over the coals for handling that money badly… all while the government under Barack Obama, kept its mouth shut except to condemn the banks for taking taxpayer money and not respecting that “privilege.”

Either way, it’s an insult to the American free market, the intelligence of the American people since we were played for such fools, and the reputation of the American government that stooped so low and caused such unmitigated chaos in both the markets and the economy from its bullying actions.

The 9 Stupid And Weak Victims

The banks required to accept funds that October were:

  1. Goldman Sachs Group Inc. (NYSE: GS)
  2. Morgan Stanley (NYSE: MS)
  3. JPMorgan Chase & Co. (NYSE: JPM)
  4. Citigroup Inc. (NYSE: C)
  5. Wells Fargo & Co. (NYSE: WFC)
  6. State Street Corp. (NYSE: STT)
  7. Bank of New York Mellon (NYSE: BK)
  8. Bank of America Corp. (NYSE: BAC)
  9. the now acquired Merrill Lynch.

Disclosure: No positions