Were Healthy Banks Forced Forced to Surrender Ownership Stakes to Government?

Were Healthy Banks Forced Forced to Surrender Ownership Stakes to Government? It’s question that needs to be answered… From reading this CNSNews.com piece it would seem at least a few “healthy” banks were forced into surrendering ownership stakes to the government:

Last October, then-Treasury Secretary Henry Paulson ordered nine banks that the Treasury Department described as “healthy” financial institutions to surrender ownership interests to the government or else face regulatory action that would force them to surrender ownership interests to the government, according to an internal Treasury Department document.

Paulson’s extraordinary threat culminated in one of the most sweeping government intrusions into the free-enterprise system in the history of the United States.

Judicial Watch, a nonpartisan watchdog organization, used the Freedom of Information Act to obtain a copy of the internal Treasury Department “talking points” that were prepared for Paulson to use at his Oct. 13, 2008 meeting with the chief executive officers (CEOs) of the nine banks.

At the meeting–to which the bankers were called at short notice–Paulson made a conspicuous display of potential government regulatory power.

Paulson was flanked by Federal Reserve Chairman Ben Bernanke; current Treasury Secretary Timothy Geithner (who was then president of the Federal Reserve Bank of New York); Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair and Comptroller of the Currency John C. Dugan.

While none of these regulators have responded to inquiries by CNSNews.com, the talking points mention each by first name.

Putting aside for the problems associated with the Federal Government bailing out failing private enterprises… Government officials should not under any circumstances be forcing healthy institutions to surrender ownership stakes to the government. It wreaks of socialism!

TARP Price Tag Could Reach $2.9 Trillion?

CNSNews has a rather frightening report on the Special Inspector General for the Troubled Asset Relief Program’s report to congress.

In short the report says that although Congress limited the Treasury Dept. to spending only $700 billion on TARP  the program’s partnerships with the Federal Reserve and the Federal Deposit Insurance Corporation could bring the total cost 2.9 trillion:

(CNSNews.com) – For many Americans, the $700-billion financial bailout was a tough pill to swallow, but the cost to taxpayers could reach $2.9 trillion – nearly on par with the entire federal budget – according to the watchdog agency charged with oversight of the Troubled Assets Relief Program (TARP).

Although the Treasury Department is only authorized to spend the $700 billion approved last year by Congress and signed by the president, the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) will invest up to $1 trillion each in partnering with the Treasury Department’s TARP.

So the “total projected funding” for TARP is estimated to be between $2.47 trillion and $2.97 trillion, according to the TARP special inspector general’s report released on April 21. That’s not so much less than the Obama administration’s proposed federal budget for fiscal year 2010 of $3.6 trillion.

Related

• TARP: The Looming Debacle – John Hinderaker, Power Line

Dianne Feinstein Routed Government Money to Husband’s Firm

The Washington Times is reporting today that Senator Dianne Feinstein (D-CA) took unusual steps to route route taxpayer dollars to the Federal Deposit Insurance Corp. which had just awarded her husband’s firm a lucrative contract:

On the day the new Congress convened this year, Sen. Dianne Feinstein introduced legislation to route $25 billion in taxpayer money to a government agency that had just awarded her husband’s real estate firm a lucrative contract to sell foreclosed properties at compensation rates higher than the industry norms.

Mrs. Feinstein’s intervention on behalf of the Federal Deposit Insurance Corp. was unusual: the California Democrat isn’t a member of the Senate Committee on Banking, Housing and Urban Affairs with jurisdiction over FDIC; and the agency is supposed to operate from money it raises from bank-paid insurance payments – not direct federal dollars.

Documents reviewed by The Washington Times show Mrs. Feinstein first offered Oct. 30 to help the FDIC secure money for its effort to stem the rise of home foreclosures. Her letter was sent just days before the agency determined that CB Richard Ellis Group (CBRE) – the commercial real estate firm that her husband Richard Blum heads as board chairman – had won the competitive bidding for a contract to sell foreclosed properties that FDIC had inherited from failed banks.

About the same time of the contract award, Mr. Blum’s private investment firm reported to the Securities and Exchange Commission that it and related affiliates had purchased more than 10 million new shares in CBRE. The shares were purchased for the going price of $3.77; CBRE’s stock closed Monday at $5.14.

Spokesmen for the FDIC, Mrs. Feinstein and Mr. Blum’s firm told The Times that there was no connection between the legislation and the contract signed Nov. 13, and that the couple didn’t even know about CBRE’s business with FDIC until after it was awarded.

Most ethical congress in history??? Not! At the very least Sen. Feinstein atcions represent a serious conflict of interest and breach of public trust… What they look like however is sceme to allow her family to cash in on taxpayer-funded bailout money.

Related

• Feinstein routes government money to firm doing business with husband – Ed Morrissey, Hot Air
• Wash Times: Democrat Sen. Feinstein Helped her Husband’s Firm to the Tune of $25B – Kim Priestap, Wizbang
• Connecting the dots in Feinstein’s intervention with FDIC – Rick Moran, American Thinker
• Feinstein Inc. – Don Surber

Washington Mutual Sues the FDIC

Washington Mutual Inc. has filed suit against the FDIC seeking to recover roughly $13 billion connected to the seizure and sale of its banking arm by federal regulators.

From Reuters:

NEW YORK (Reuters) – Washington Mutual Inc, the failed U.S. savings and loan, has sued the Federal Deposit Insurance Corp for well over $13 billion in connection with the loss of its banking operations, which was acquired by JPMorgan Chase & Co.

In a complaint filed with the U.S. District Court for the District of Columbia, the thrift’s former parent accused the FDIC of having on January 23 made a “cryptic disallowance” of its claims, prompting the lawsuit.

It also accused the FDIC of agreeing to an unreasonably low price in arranging the a $1.9 billion sale of the banking business to JPMorgan on September 25, when regulators seized Washington Mutual and appointed the FDIC as receiver.

JPMorgan did not buy the parent holding company, which filed for Chapter 11 bankruptcy protection the following day.

In its complaint, Washington Mutual seeks to recover as much as $6.5 billion of capital contributions it said it made to its banking unit from December 2007 through the seizure.

Washington Mutual also seeks the return of $4 billion of trust preferred securities it said were wrongfully transferred to the banking unit, and said it may be entitled to as much as $3 billion of tax refunds. It also seeks damages of $177.1 million related to unpaid loans made to the banking unit.

I don’t have any specific comments on this case although I have the feeling this may be the first of many suits filed against the FDIC.

Here We Go Again: Feds Agree to Citibank Bailout

From the Wall Street Journal:

The federal government agreed Sunday to take unprecedented steps to stabilize Citigroup by moving to guarantee close to $300 billion in troubled assets weighing on the bank’s books.

Treasury has agreed to inject an additional $20 billion in capital into Citigroup under terms of the deal hashed out between the bank, the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. Treasury officials will charge a higher interest rate for the capital injection — 8% for the first few years — than it has charged to dozens of other banks now borrowing money under the government’s the $700 billion rescue package approved by Congress last month.

Here’s my prediction: It’s not going to work…  Sure it’ll make everyone feel good and stocks will rise in the short term but once the euphoria wears off and reality sinks in we’ll be right back where we started.

Michelle Malkin says:

Crap Sandwich 2.0 is morphing again.

We’ve gone from the toxic assets purchase plan to the capital injection plan to the throw-it-all-against-the-wall-and-whatever-the-hell-sticks-sticks non-plan plan.

And there in lies the problem, at least from my perspective… We rushed into this bailout business without really understanding the full scope of the problem and are now groping around in the dark trying to find a way out.