Please God, Don't Let The Big Banks Get Their Feelings Hurt
Rescue Package 2.0 features $250 billion of investment in banks, 40% of which goes to just four banks (Bank of America, Citigroup, JP Morgan Chase, and Wells Fargo). The dominant theme coming from the Treasury Department and from the conventional wisdom commentariat is that it was essential to walk a "fine line" so that these banks feel entirely comfortable in accepting our money.
What exists on either side of that no-so-fine line? On one side is the public interest; on the other side is unjust private enrichment. So even in the plan's conception, the idea is to see the extent to which the public interest can be minimized.
If an entity wants $25 billion of my money, the first things I would want to know would be: (1) Do you need it? and (2) How come? Unfortunately, Treasury is most interested in avoiding "stigmatizing" any bank, so we taxpayers none of that basic disclosure.
If a bank did need the massive infusion of cash from a private investor, that private investor (say, for example, Warren Buffett) would not be saying, "How can I arrange the deal to make it least burdensome on you." That private investor would be in the driver's seat, and would demand terms accordingly. Does the Treasury follow that private sector example? No, sir.
Henry Paulson has been palling around with financial terrorists, and there's no telling what those guys might do if they get crossed. Best to give them whatever they want.
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Exactly right. And very enjoyably written.
October 14, 2008 9:59 AM | Reply | Permalink
When I was a young adult and got myself in a financial mess, my dad wouldn't just give me the money I asked to borrow when I sought help. He said "give me all your credit and bank account statements and I'll help you". He wanted to be a partner in restoring my financial health. He approached my problem as a compassionate, responsible adult should so that both learning and success would result.
Fast forward to my time in middle management at a hospital losing $2M per month. As managers we were required to forgo raises until the bottom line was black again. That lasted three years - no raises, no bonuses - nothing.
My point is that the bankers need to be dragged by the ear, made to understand the magnitude of their failings and share in the inevitable pain a solution will require. Sharing the pain, in my mind, would require the senior executives to write checks from their personal own wealth, accumulated during the good times, to help recapitalize their institutions. I would also like to see quarterly public reports on what my tax dollars have accomplished.
Hurt their feelings. Treat them like adults they claim to be.
October 14, 2008 11:54 AM | Reply | Permalink