"As the meeting neared a close, each banker was handed a term sheet detailing how the government would take stakes valued at a combined $125 billion in their banks, and impose new restrictions on executive pay and dividend policies." The bankers were told "they weren't allowed to negotiate. Mr. Paulson requested that each of them sign. It was for their own good, and the good of the country, he said, according to a person in the room."
My mind reels. A command appearance before government regulators was followed by a command (not a "request") surrender of autonomy by the nine biggest banks in the U.S. A forced "sale" of preferred shares to the government was ordered in return for billions of newly minted dollars from the Fed ...
Surely this wasn't happening in America. The very notion of bureaucrats telling business leaders what they must do "for their own good, and the good of the country" makes me want to throw up. Preposterous. By what authority? How would they know? What conceit!
How did America's leading bankers react? Did they laugh in the regulators' faces, tear up the "term sheets," and storm out of the room? Did they hold press conferences condemning this high-handed and obviously unconstitutional attempt to intimidate and steal private assets? Not exactly...
A long train of government policy mistakes led to the financial crisis, but the capitulation by business leaders to the demands and claims of government officials has turned what could have been a contained and short-term economic problem into a genuine threat to the very survival of capitalism, and with it, of democracy. (Go to Capmag.com to read the whole article).
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