Last October, then-Treasury Secretary Henry Paulson ordered nine banks that the Treasury Department described as “healthy” financial institutions to surrender ownership interests to the government or else face regulatory action that would force them to surrender ownership interests to the government, according to an internal Treasury Department document.
Paulson’s extraordinary threat culminated in one of the most sweeping government intrusions into the free-enterprise system in the history of the United States.
Judicial Watch, a nonpartisan watchdog organization, used the Freedom of Information Act to obtain a copy of the internal Treasury Department “talking points” that were prepared for Paulson to use at his Oct. 13, 2008 meeting with the chief executive officers (CEOs) of the nine banks.
At the meeting–to which the bankers were called at short notice–Paulson made a conspicuous display of potential government regulatory power.
Paulson was flanked by Federal Reserve Chairman Ben Bernanke; current Treasury Secretary Timothy Geithner (who was then president of the Federal Reserve Bank of New York); Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair and Comptroller of the Currency John C. Dugan.
While none of these regulators have responded to inquiries by CNSNews.com, the talking points mention each by first name.
The Fed, the FDIC and the Office of the Comptroller of the Currency all regulate various elements of the U.S. banking industry.
“Ben, Sheila, John, Tim and I have asked you here this afternoon because we are of the view that the United States needs to take strong and decisive action to arrest the stress in the financial system,” Paulson’s talking points directed him to tell the assembled bankers.
The talking points indicate that Paulson then told the nine bank CEOs that the government was going to use $250 billion of the $700 billion approved by Congress to shore up the financial industry through the “Troubled Asset Relief Program” (TARP) to buy stock in banks all across the country and that the nine banks these CEOs represented had no choice but to allow the government to buy their stock–or else.
Paulson assured the CEOs that the government would inform the public that the banks were “healthy institutions, participating in order to support the U.S. economy.”
In other words, according to the treasury secretary’s confidential talking points, the nine banks were not failing financial institutions that had come to the federal government in desperate need of a bailout from the taxpayers to stay in business.
Instead, they were healthy institutions that were being compelled to surrender ownership stakes to the government in order to help the government carry out a government policy.
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