I hate the Wall Street banks as much as anyone else, but we have to acknowledge that not all the Wall Street banks are the same, and that the federal government is as responsible for this mess as anyone is.
(Bloomberg) -- Former Treasury Secretary Henry Paulson, describing nine U.S. banks as “central to any solution” of the credit crisis, told their leaders to take government aid or be forced to by regulators, according to a memo his staff prepared for a private meeting in October.
“If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance,” Paulson’s one-page list of talking points for the session with the banks’ chief executive officers said.
“We don’t believe it is tenable to opt out because doing so would leave you vulnerable and exposed,” the memo said.
Investing $125 billion in the financial institutions was a shift for the Bush administration, which had proposed buying troubled assets with $700 billion Congress approved 10 days earlier. The memo is among newly released Treasury Department documents containing details about the Oct. 13 meeting.
“Most Americans are going to be uncomfortable with the government forcing the banks into this arrangement,” said Tom Fitton, president of Judicial Watch, a nonprofit research group in Washington that obtained the documents under a Freedom of Information Act request.
The CEOs who attended were Kenneth Lewis of Bank of America Corp., Vikram Pandit of Citigroup Inc., Lloyd Blankfein of Goldman Sachs Group Inc., Jamie Dimon of JPMorgan Chase & Co., John Thain of Merrill Lynch & Co., now part of Bank of America;Robert Kelly of Bank of New York Mellon Corp., Ronald Logue of State Street Corp., John Mack of Morgan Stanley and Richard Kovacevich of Wells Fargo & Co.
Accompanying Paulson were Federal Reserve Chairman Ben Bernanke, Federal Deposit Insurance Corp. Chairman Sheila Bair and New York Federal Reserve Bank President Timothy Geithner, who succeeded Paulson as Treasury secretary.
The Monday meeting came after Paulson had huddled with Geithner, Bair and Treasury aides Sunday afternoon and then placed calls that evening to each CEO except Blankfein, according to the secretary’s daily log.
The Treasury has invested $199.1 billion in the bank preferred share program, with $1.2 billion since returned by 12 institutions, according to government data.
A lot has been written about how the bankers got us into this mess, so we shouldn't expect them to get us out. OTOH, the Treasury Department and Federal Reserve also got us into this mess, and they are still in charge as well.