Now fast forward to earlier this week. From the New York Times [HT: HBL]:
According to the article, many of the bankers, even some who had experienced troubles, balked at such blatant government intrusion, saying that they had already raised private capital and did not need help. But in the end, they all signed on the dotted line. They were obviously pressured to do so, "voluntarily" signing something which they were compelled to sign.The chief executives of the nine largest banks in the United States trooped into a gilded conference room at the Treasury Department at 3 p.m. Monday. To their astonishment, they were each handed a one-page document that said they agreed to sell shares to the government, then Treasury Secretary Henry M. Paulson Jr. said they must sign it before they left.
The chairman of JPMorgan Chase, Jamie Dimon, was receptive, saying he thought the deal looked pretty good once he ran the numbers through his head. The chairman of Wells Fargo, Richard M. Kovacevich, protested strongly that, unlike his New York rivals, his bank was not in trouble because of investments in exotic mortgages, and did not need a bailout, according to people briefed on the meeting.
But by 6:30, all nine chief executives had signed — setting in motion the largest government intervention in the American banking system since the Depression and retreating from the rescue plan Mr. Paulson had fought so hard to get through Congress only two weeks earlier.
What happened during those three and a half hours is a story of high drama and brief conflict, followed by acquiescence by the bankers, who felt they had little choice but to go along with the Treasury plan to inject $250 billion of capital into thousands of banks — starting with theirs. {bold added}
Many bloggers have written about the financial crisis and bailout (see the Financial Crisis Roundup, Ed Cline at Rule of Reason, and Gus Van Horn), presenting both moral and economic reasons why the bailout should be abolished, and that the only real solution is to get the government out of the economy completely. But two things about this recent shakedown of the biggest US banks stick out to me. One is the blatant and outlandish thuggery of the Treasury and the Fed, which is scary both because of the specifics of the extortion, and that they felt justified in doing it.“It was a take it or take it offer,” said one person who was briefed on the meeting, speaking on condition of anonymity because the discussions were private. “Everyone knew there was only one answer.”
The other is the fact that the government is clearly panicking, taking any and all actions that would possibly, maybe, somehow fix things through some mechanism they are unsure of. They are casting about, and when asked what the results of a particular action will be, they say "It's hard to guess," or "It will be a long time before we see what the results will be." One thing is consistent in all of this, however; only measures that increase government power are being considered.
And do you remember the shocking figure of the $700 billion bailout, and how we thought it would easily creep up to $1 trillion?
This is just the beginning. As the markets continue their instability, and the people continue to blame greedy Wall St. and Bush Deregulation as the culprits, government will keep doing what it does best: thuggery, intimidation, and forcible redistribution of wealth. Barack Obama is now a virtual shoe-in for the presidency, because people unfathomably think he will be good for the economy.All told, the potential cost to the government of the latest bailout package comes to $2.25 trillion, triple the size of the original $700 billion rescue package...
Well, Hoover started many progressive policies that lead up to the Crash, and FDR did a great job of extending them with the New Deal, thus extending the Depression. I think Bush has done an admirable job emulating Hoover, and Obama is just the man to follow in FDR's footsteps.
Brother, can you spare a dime?
3 comments:
I was watching CNBC the day the NYTimes gave the details of Paulson's thuggery. All three reporters -- ostensibly cheerleaders of free-markets -- were gloating.
One of them asked something like this (from memory): "Wouldn't you have liked to be a fly on the wall to watch those CEO's squirm".
Your comparison is apt. Obama seems to be in possession of FDR's playbook.
SN, that's awful. It just shows how far conservative thought has fallen. There is a local sports talk show host here in Boston who is notoriously conservative. Today he was ranting about the $250K limit in Obama's tax plan (it was mentioned he is over that limit), and how unfair it is to raise taxes like that, but in the same breath said that the people who make $100M wouldn't notice a huge tax hike. So, soaking the rich is fine as long as he isn't one of them.
Bill, that's a scary article you linked to, in this context. I can't believe that I'm saying this, but I can actually envision a time when we'll be lining up for tofu made from Ma Chalmers' soybeans, and then trudging off to work for the reconstituted Works Progress Administration.
It's easy to get into histrionics over this stuff, but even a calm, level-headed analysis of the near future is sobering, to say the least. It's goddamned depressing, actually.
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