Paulson: ‘Dissenters Would Not Be Tolerated’ Among U.S. Banks
It was an offer the banking titans gathered in Washington could not refuse.
As the chief executives of the nine biggest financial groups in the U.S., including Citigroup, Bank of America and Goldman Sachs, sat in a conference room of the Treasury building last October, the message was loud and clear.
After outlining the government’s plan to purchase up to $250bn in the preferred stock of banks, Hank Paulson, then-U.S. Treasury secretary, was quick to emphasise that dissenters would not be tolerated.
“We don’t believe it is tenable to opt out,” he told the bank executives, according to official documents released this week. His comments pre-empted opposition from banks such as JP Morgan Chase and Wells Fargo that regarded themselves as healthy enough not to need government money. “If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance.”
The strategy devised by Mr Paulson – a former Goldman chief who had known many of the executives in that room for years – was simple: all nine institutions had to take the money to minimise the stigma that came with a government bail-out. >>>
Judicial Watch filed a Freedom of Information Act (FOIA) request about the bankers meeting on October 16, 2008. After months of stonewalling, a FOIA lawsuit was filed against the Obama Treasury Department on January 27, 2009. Incredibly, on February 4, Treasury responded it had no documents about the historic meeting. Pressure from Judicial Watch forced Treasury to reevaluate its response, which resulted in this document release last month. Included in the new documents are:
- “CEO Talking Points” [.pdf] used by former Treasury Secretary Hank Paulson confirming that the nine bank CEOs present at the October 13 meeting had no choice but to accede to the government’s demands for equity stakes and the resulting government control. The talking points emphasize that “if a capital infusion is not appealing, you should be aware your regulator will require it in any circumstance.” Suggested edits of the “talking points” by Tim Geithner, then-New York Fed President, were withheld by the Obama Treasury Department.
- “Major Financial Institution Participation Commitments” [.pdf] signed by the nine bankers on October 13. The CEOs not only hand wrote their institution’s names but also hand wrote multi-billion dollar amounts of “preferred shares” to be issued to the government.
- Email documenting that, on the very day of the meeting, the Chief of Staff to the Treasury Secretary and other top Treasury staff did not know the names of any of the banks that would be in attendance. [.pdf]
- Email showing Treasury officials wanted to use the Secret Service to help keep the press away from the CEOs arriving at the meeting. [.pdf]
- Email showing a public relations effort, run in part out of the Bush White House, to tamp down public concerns about “nationalizing the banks.” [.pdf]
- Email showing that Paulson was able to brief Barack Obama about the bankers meeting almost immediately, but could not reach Senator John McCain. [.pdf]
The CEOs present at the October 13 meeting were Vikram Pandit of Citigroup, Jamie Dimon of JP Morgan, Richard Kovacevich of Wells Fargo, John Thain of Merrill Lynch, John Mack of Morgan Stanley, Lloyd Blankfein of Goldman Sachs, Robert Kelly of Bank of New York, and Ronald Logue of State Street Bank.
“These documents show our government exercising unrestrained power over the private sector. Despite promises of transparency, the Obama administration tried to cover up the very existence of these smoking-gun documents. And the cover-up continues, as the Obama administration protects Timothy Geithner by withholding a key document about his role in this infamous bankers meeting,” stated Judicial Watch President Tom Fitton.