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The Fed FORCED Money On Banks

Mike

Well-known member
At Moment of Truth, U.S. Forced Big Bankers to Blink
By DAMIAN PALETTA, JON HILSENRATH and DEBORAH SOLOMON

OCTOBER 15, 2008

WASHINGTON — On one side of the table sat Treasury Secretary Henry Paulson, flanked by Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair.

On the other side sat the nation’s top bank executives, who had flown in from around the country, lined up in alphabetical order by bank, with Bank of America Corp. at one end of the table and Wells Fargo & Co. at another.

It was Monday afternoon at 3 p.m. at the Treasury headquarters. Messrs. Paulson and Bernanke had called one of the most important gatherings of bankers in American history. For an hour, the nine executives drank coffee and water and listened to the two men paint a dire portrait of the U.S. economy and the unfolding financial crisis. 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 participants, among the nation’s best deal makers, were in a peculiar position. 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.

During the discussion, the most animated response came from Wells Fargo Chairman Richard Kovacevich, say people present. Why was this necessary? he asked. Why did the government need to buy stakes in these banks?

Morgan Stanley Chief Executive John Mack, whose company was among the most vulnerable in the group to the swirling financial crisis, quickly signed.

Bank of America’s Kenneth Lewis acknowledged the obvious, that everyone at the table would participate. “Any one of us who doesn’t have a healthy fear of the unknown isn’t paying attention,” he said.

This account is based on interviews with participants, government officials and banking-industry executives.

Regulators had spent the weekend crashing out their latest strategy to restore confidence to America’s battered banking system. As markets tumbled last week and foreign governments began taking dramatic steps, U.S. officials coalesced around a plan that would include guaranteeing bank debt and a big capital injection. Policy makers wanted to deliver a “confidence shock,” one participant said.

Treasury and government officials held multiple meetings and conference calls on Saturday. Dozens of officials gathered at Treasury’s headquarters Sunday morning and stayed into the evening, lunching on sandwiches from Potbelly Sandwich Works.

They kept coming back to the same question: Is the plan too sweeping? Policy makers knew they were taking unprecedented steps. It would take years to disentangle banks from the federal government. Some of these temporary steps would be hard to undo.

Policy makers debated how the government’s capital injections should be structured, especially the question of the dividend banks would pay. Make it too high, and that risked draining firms of needed funds and scaring off other potential rescue recipients. Make it too low, and taxpayers wouldn’t be compensated for their risk. Another challenge: Inject capital without scaring away private investors.

A final deal between regulators was hashed out in Mr. Paulson’s office Sunday afternoon. For Mr. Paulson, who had spent a career as an investment banker, the decision marked a reversal. Just weeks earlier, he had said that injecting capital directly into banks would appear to be a sign of “failure.”

The top bankers were then told to show up for a meeting Monday at 3 p.m., but were given few details. Expecting an uproar over the plan, government officials secretly planned to break off the first meeting, giving CEOs time to vent, talk to their boards, clear their heads, and reconvene at 6:30 p.m.

In Mr. Paulson’s call with Morgan Stanley’s Mr. Mack, people familiar with the matter say, the CEO asked the Treasury secretary the reason for the meeting. Mr. Paulson responded: “Come on down, we’ll tell everyone at the same time,” adding, “I think you’ll be pleased.”

Also at the 3 p.m. gathering was New York Fed President Timothy Geithner, along with Fed Governor Kevin Warsh and Comptroller of the Currency John Dugan. Behind them were lawyers and staff. The meeting took place in the Treasury secretary’s conference room, which faces a courtyard and is outfitted with mahogany chairs, antique wall sconces and chandeliers.

It struck some of those in the room as fortunate that Citigroup Inc. and Wells Fargo are so far apart in the alphabet. The two firms just last week were locked in a bitter battle over control of banking giant Wachovia Corp., a fight Wells Fargo eventually won. Citigroup is still seeking billions of dollars from Wells Fargo in damages for swooping in on the Citigroup deal after regulators had already blessed it. With the firms sitting alphabetically, at least the heads of the two rivals, Mr. Kovacevich and Citigroup Chief Executive Vikram Pandit, wouldn’t have to sit next to each other.

Mr. Paulson said the public had lost confidence in the banking system. “The system needs more money, and all of you will be better off if there’s more capital in the system,” Mr. Paulson told the bankers.

After Mr. Kovacevich voiced his concerns, Mr. Paulson described the deal starkly. He told the Wells Fargo chairman he could accept the government’s money or risk going without the infusion. If the company found it needed capital later and Mr. Kovacevich couldn’t raise money privately, Mr. Paulson promised the government wouldn’t be so generous the second time around.

Mr. Bernanke said the situation was the worst the country had endured since the Great Depression. He said action was for the collective good, an understated appeal. The room was silent as he described the economy’s fragile condition.

Mr. Geithner, whose job as New York Fed chief makes him the central bank’s main man on Wall Street, delivered the most sobering news. He described how much preferred stock the government was going to buy from each firm. The government would take $25 billion in Citigroup, $10 billion in Goldman Sachs Group Inc., and so on.

The CEOs shot off questions, peppering officials for details about how the share purchases would be structured and how it might constrain them. At one tense moment, Mr. Bernanke jumped in to calm nerves. The meeting didn’t need to be confrontational, he said, describing paralysis in the market and the threat that posed to everyone in the room.

U.S. officials argued the plan represented a good deal for the banks: The government would be buying preferred shares, and thus wouldn’t dilute their common shareholders. And the banks would pay a relatively modest 5% in annual dividend payments.

The meeting ended at about 4 p.m. By 6:30 p.m., all of the sheets had been turned in and signed by the CEOs. No second meeting was held.
 
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Anonymous

Guest
Was the Bush crew lying again-- or are these banks now trying to waffle out of their contracts with the taxpayers... :???:

110 US banks have asked for $170B from bailout
The Associated PressPublished: November 15, 2008


WASHINGTON: At least 110 banks have requested more than $170 billion from the Treasury Department's rescue fund, and many more are expected to have submitted applications before Friday's deadline.

The requests would come from the $250 billion the Treasury set aside from the $700 billion fund to purchase stock in banks.

Analysts at Keefe, Bruyette & Woods estimated that 62 banks have received full or preliminary approval from the Treasury for $173 billion from the Troubled Asset Relief Program. The government said Monday that American International Group Inc. also would receive $40 billion from the program.

That $40 billion, however, won't come from the $250 billion set aside for the banks.

Another 48 banks have applied for about $6.5 billion, according to the Keefe, Bruyette & Woods report. Several banks that have filed applications said they haven't yet decided whether to accept any funds.

One of those companies, Hartford Financial Services Group Inc., said it would be eligible to receive between $1.1 billion and $3.4 billion if its purchase of Federal Trust Bank is approved. Generally, only banks and savings and loans are eligible for direct investment from the TARP. AIG is the only nonbank company to receive such funds so far.

The total also doesn't include American Express Co., which said Monday it has restructured as a bank holding company, reportedly to seek up to $3.4 billion in funding.

Publicly-held banks were required to file their applications by Friday. Private banks have been given an extended, though unspecified, deadline.

Industry sources expect a flurry of last-minute applications will be filed Friday. Treasury spokeswomen on Friday wouldn't disclose how many applications have been filed or how much has been requested.

Nine large banks, including Bank of America Corp., Wells Fargo & Co., Citigroup Inc. and JPMorgan Chase & Co., received $125 billion last month.

Neel Kashkari, interim director of the bailout at Treasury, told lawmakers Friday that about 20 more banks would receive funds that day.

The Treasury has "approved dozens of applications from banks across the country," he said.

Several banks announced Friday that they have received funds under the plan, including Huntington Bancshares Inc., Comerica Inc. and KeyCorp.

http://www.iht.com/articles/ap/2008/11/15/america/NA-US-Meltdown-Banks.php
 

Mike

Well-known member
Nine large banks, including Bank of America Corp., Wells Fargo & Co., Citigroup Inc. and JPMorgan Chase & Co., received $125 billion last month.

From your article...........................

Those were the ones FORCED to take the bailouts.
 

hypocritexposer

Well-known member
This was in October,

and impose new restrictions on executive pay and dividend policies.

This was Obama taking credit for it in Feb.

U.S. President Barack Obama imposed tough new rules on Wednesday to rein in corporate pay, capping executive compensation at $500,000 US a year for firms receiving taxpayer funds and limiting lavish severance packages paid to top officials.
 
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Anonymous

Guest
Mike said:
Nine large banks, including Bank of America Corp., Wells Fargo & Co., Citigroup Inc. and JPMorgan Chase & Co., received $125 billion last month.

From your article...........................

Those were the ones FORCED to take the bailouts.

Bernanke did mention that in his little talk with Congress.... That because of lack of oversight and regulation that occurred for a period of time-and the fact that the private risk evaluators were not doing their job (actually lying to get business)- some banks were undercapitalized for what the Fed and the Treasury then determined their actual risk to be after the economic crisis began to break....They were then forced to capitalize to that level- and when unable to do so thru any private sources- were then eligible for TARP funding...

This is one reason why when all these Banks CEO's appeared before Congress they asked for an Independent Government Risk Evaluator- along with a Global Risk Evaluator...
 

alice

Well-known member
Well, according to what I watched on C-Span, Barney Frank said they could give it back...so, what's the problem? All of us that watched the hearings heard it! Therefore, if they don't want it, they should give it back! "Common sense" dictates that, correct? Unless, of course, it's already been spent.

Alice
 

Mike

Well-known member
Oldtimer said:
Mike said:
Nine large banks, including Bank of America Corp., Wells Fargo & Co., Citigroup Inc. and JPMorgan Chase & Co., received $125 billion last month.

From your article...........................

Those were the ones FORCED to take the bailouts.

Bernanke did mention that in his little talk with Congress.... That because of lack of oversight and regulation that occurred for a period of time-and the fact that the private risk evaluators were not doing their job (actually lying to get business)- some banks were undercapitalized for what the Fed and the Treasury then determined their actual risk to be after the economic crisis began to break....They were then forced to capitalize to that level- and when unable to do so thru any private sources- were then eligible for TARP funding...

This is one reason why when all these Banks CEO's appeared before Congress they asked for an Independent Government Risk Evaluator- along with a Global Risk Evaluator...

1- Lack of Oversight=CONGRESS
2- Lack of Regulation=The FEDERAL RESERVE (by far the largest regulator)

Reasons given for forcing nine of the biggest banks to take the money is that they didn't know themselves whether they were solvent or not.

Had any ONE of those banks gone down, it would have created a panic and there would have been a bank run like no other.......
 

alice

Well-known member
Mike said:
Oldtimer said:
Mike said:
From your article...........................

Those were the ones FORCED to take the bailouts.

Bernanke did mention that in his little talk with Congress.... That because of lack of oversight and regulation that occurred for a period of time-and the fact that the private risk evaluators were not doing their job (actually lying to get business)- some banks were undercapitalized for what the Fed and the Treasury then determined their actual risk to be after the economic crisis began to break....They were then forced to capitalize to that level- and when unable to do so thru any private sources- were then eligible for TARP funding...

This is one reason why when all these Banks CEO's appeared before Congress they asked for an Independent Government Risk Evaluator- along with a Global Risk Evaluator...

1- Lack of Oversight=CONGRESS
2- Lack of Regulation=The FEDERAL RESERVE (by far the largest regulator)

Reasons given for forcing nine of the biggest banks to take the money is that they didn't know themselves whether they were solvent or not.

Had any ONE of those banks gone down, it would have created a panic and there would have been a bank run like no other.......

What in the world are you doing sitting in Alabama. You need to get on up to D.C. and tell those folks how it needs to be done...OR ELSE!!!!!!

BTW, when you happen upon children that are in distress, it's really best to call an ambulance and the authorities, aka, law enforcement!

Alice
 

Faster horses

Well-known member
I understand from a very good source, (my banker :shock: ) that
Bank of America is owned by Mexico and Wells Fargo Bank is foreign
owned. So why are we bailing them out? And why has this not been
brought to light, as I hardly think they are the only two that are owned
by another country?
 

Mike

Well-known member
BTW, when you happen upon children that are in distress, it's really best to call an ambulance and the authorities, aka, law enforcement!

It takes an ambulance 30-40 minutes to get here and 30-40 minutes to get back to he hospital. Those are the times they can even find the house. Much quicker to put them in the car and go.

Plus most of the time when we go into these areas we have a sheriff's deputy accompanying us.
 
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