Saturday, April 4, 2009

They're Trying to Control the Banks

There is a major story hidden in a Stuart Varney op-ed in today's WSJ.

Varney reveals the hammer the government used under the Bush Administration to force some banks to take TARP money.
Here's a true story first reported by my Fox News colleague Andrew Napolitano(with the names and some details obscured to prevent retaliation). Under the Bush team a prominent and profitable bank, under threat of a damaging public audit, was forced to accept less than $1 billion of TARP money. The government insisted on buying a new class of preferred stock which gave it a tiny, minority position.
Get that? A profitable bank was forced to accept TARP money under threat of a damaging audit. There are a lot of lessons here about giving even more control to bank regulators. That control can be abused. Audits by regulators weren't originally designed so that the government could use the threat of an audit to force bankers to make decisions that are not in the interests of bank shareholders. That is exactly what we have here.

BUT, the even bigger story is that now that some banks are starting to give TARP money back, this bank would like to do so. Here's Varney again:
Fast forward to today, and that same bank is begging to give the money back. The chairman offers to write a check, now, with interest. He's been sitting on the cash for months and has felt the dead hand of government threatening to run his business and dictate pay scales. He sees the writing on the wall and he wants out. But the Obama team says no, since unlike the smaller banks that gave their TARP money back, this bank is far more prominent. The bank has also been threatened with "adverse" consequences if its chairman persists. That's politics talking, not economics
Again, you have the government threatening a bank that doesn't want TARP money. Scary stuff. Putting power into the hands of government via regulatory bodies can be dangerous. And it appears that both the Bush Administration was willing, and the Obama Administration is willing, to abuse the power of regulatory bodies for their own objectives, which appears to be propping up favored banks, in part, by making strong banks look weak.

Varney understands the dangerous road we are going down:

Think about it: If Rick Wagoner can be fired and compact cars can be mandated, why can't a bank with a vault full of TARP money be told where to lend? And since politics drives this administration, why can't special loans and terms be offered to favored constituents, favored industries, or even favored regions? Our prosperity has never been based on the political allocation of credit -- until now.


  1. Until these banks are willing to be identified by name, and until their chiefs are willing to go on public record with their opposition to TARP/nationalisation, little can be done.

    This guy says they are also pursuing 'socialism by stealth' in the media / talk radio regulation area.

  2. That op ed was good, except he said something like "arguably at the time, Paulson was just trying to save the financial system."

    In other words, the Fox News people still can't admit that Republicans are dangerous too.

    Until they do that, nothing will change. Team Obama is just running through the hole that Bush opened up for them.