The banner headline blares: “U.S. Forces Nine Major Banks To Accept Partial Nationalization”.
While the article doesn’t specify exactly how banks were forced, it’s clear that they were bullied:
[T]he government ordered the chief executives of nine prominent banks to attend a meeting yesterday at the imposing offices of the Treasury Department, next-door to the White House.
The participants included: Bank of America, J.P. Morgan Chase and Wells Fargo, retail banking giants that together control 30 percent of the nation’s deposits; Wall Street titans Goldman Sachs, Morgan Stanley and Merrill Lynch, which has agreed to be bought by Bank of America; and Citigroup, the most international of the American banks. Also invited were the Bank of New York Mellon and State Street, lesser-known banks that play a crucial role as the back offices for the financial system.
Treasury Secretary Henry M. Paulson Jr. told the executives that for the good of the nation — patriotism was specifically invoked, according to a person briefed on the discussions — they would each have to sell the government a stake in their companies.
Representatives of several banks underscored after the meeting that they did not need the government’s money but said they cooperated out of obligation and to help heal the financial system.
The government will invest $125 billion in the nine banks, and then it will make another $125 billion available to the 8,500 smaller banks, which can choose whether to participate. Banks that accept the investments — as the big nine must — will issue to the government preferred shares of stock, meaning that the shares will pay annual interest. That has the effect of immediately reducing the value of existing shares and of limiting the companies’ future profits, by directing some of their revenues to the government.
This is frightening. First the government insists that its bail-out is necessary to protect people’s entitlement to buy flat-screen TVs on credit and forces the $700-Billion power grab through Congress. Then, banks that don’t want Big Brother’s hemlock are coerced and cajoled like Socrates into drinking it.
And what is our federal overlords’ goal in imposing this semi-voluntary sentence of death on the free market? To restore confidence in the financial system.
They really don’t get it.