Video: How banks got strongarmed into TARP
posted at 8:05 am on January 8, 2010 by Ed Morrissey
Via the Right Scoop, John Stossel gives us an inside look into the actual application of TARP with banks who didn’t need it and didn’t want it. John Allison, CEO of BB&T, not only didn’t want TARP money but openly opposed the program altogether, lobbying Congress against it. After all, BB&T had made wiser decisions and by normal standards was overcapitalized even after the financial collapse. Allison tells how Ben Bernanke became Time’s Person of the Year by pressuring healthy banks to take TARP money in order to hide which banks were actually in trouble:
How far off is this from, “Hey, nice bank ya got here. Hate to have anything … happen to it. Capisce?” As Allison explains, the Fed didn’t exactly sweeten the deal, either. BB&T had to pay back some hefty interest when they gave the money back — a tax on wisdom and good investment while providing political cover to institutions whose lack of same caused the fragility Bernanke wanted to mask.
But hey, protection rackets are like that. They tax the honest people to subsidize the less honest.
Blowback
Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.
Trackbacks/Pings
Trackback URL
Comments
Indict all these crooks. Jeeeeesh!
OmahaConservative on January 8, 2010 at 8:09 AM
Chicago strong arm politics. You gotta level the playing field so your “favorite” banks that will play the game can come out ahead.
Johnnyreb on January 8, 2010 at 8:09 AM
Hmmmm….a pattern?????
TARP – You will accept this money whether you want it or not!
Heathcare – You will accept this plan whether you want it or not!
yoda on January 8, 2010 at 8:13 AM
Man of the year!
flytier on January 8, 2010 at 8:16 AM
NOW it makes sense why he is Times Man of the Year. Washinton needs an enema
shov74 on January 8, 2010 at 8:16 AM
The most depressing thing about this is how accustomed we’re all getting to hearing this sort of thing about our government that it’s barely a blip on the shock radar to most, if they even hear about it. How does one stop and reverse this type of government behavior, especially when both sides are complicit to some degree?
Monica on January 8, 2010 at 8:18 AM
Sort of like healthcare? Can’t wait.
uknowmorethanme on January 8, 2010 at 8:19 AM
What will it take to hold these thugs and thieves responsible for RICO offenses?
tru2tx on January 8, 2010 at 8:20 AM
Ha ha Let’s have Joe Pesci play the lead in the Ben Bernanke movie…How I Saved America, The Ben Bernanke Story. Maybe they can show THAT on C-Span!
shov74 on January 8, 2010 at 8:22 AM
His stalwart resistance to the Fed extends a lot further than resisting TARP. Just think, the banks that got themselves into trouble in the first place did so by letting their CRA reviews degrade their mortgage and community lending standards. BB&T had to fight those battles every year at CRA audit time, and especially fight hard whenever they wanted to buy another bank. This man is a business hero (and I don’t own any of his stock either!), as are other business people who resist the collectivists in DC.
MTF on January 8, 2010 at 8:23 AM
And the lamestream media fiddles on …
tarpon on January 8, 2010 at 8:23 AM
Great idea here, let’s give all our medical data to these people.
“So you need your medicine huh, who do plan on voting for next election?”
Bishop on January 8, 2010 at 8:26 AM
Seeing how TARP was forced on banks in all of the skin crawling glory of our government, I wonder how anyone can still believe that it was needed at all and not even question the financial ‘crisis’.
myrenovations on January 8, 2010 at 8:29 AM
Lenders—-making slaves of borrowers…whether they want the $$, or not.
there’s a proverb about that somewhere…
ted c on January 8, 2010 at 8:31 AM
True Grit
maverick muse on January 8, 2010 at 8:32 AM
What did Paulsen know and when did he know it?
Blacksmith8 on January 8, 2010 at 8:35 AM
As a former BB&T employee and share holder I am so pissed about this. It’s BS and this administration needs to be run out of town and the next thing smoking.
milwife88 on January 8, 2010 at 8:36 AM
Stossel has a great show.
Lisa on January 8, 2010 at 8:36 AM
BTW: he didn’t mention the fact that because they “took” bailout money some of their branches underwent a federal audit.
milwife88 on January 8, 2010 at 8:38 AM
Of the people, by the people, for the people?
We, the people, obviously don’t have a grip on this country that was created to be ours, and not the property of Big Government. Revolution time or forever regret it.
Keemo on January 8, 2010 at 8:38 AM
Right on! It can be one of those crime thriller movies about sleaze and corruption at high levels in government. The movie could also star Jack Nicholson, Al Pacino, Robert De Niro and Ray Liotta. Martin Scorsese of course would direct it.
Basil Fawlty on January 8, 2010 at 8:39 AM
I wish my crappy cable company got FBN or FNC would put him on at 7 (suck it Shep). Quick- someone yell DEMAND IT!
Monica on January 8, 2010 at 8:40 AM
meanwhile, BLS is reporting that unemployment is still…. yes, at 10% and that December job losses were “higher than expected..” whodathunkthat?
ted c on January 8, 2010 at 8:40 AM
So you were a predatory lender and oppressor of the poor? Racist.
Bishop on January 8, 2010 at 8:40 AM
Basil Fawlty on January 8, 2010 at 8:39 AM
GM car sales…
ted c on January 8, 2010 at 8:42 AM
Drudge has the flashing light up about job losses in Dec…of course it is ‘worse than expected’ As Rush says, who are these ‘experts’ that are ALWAYS wrong?
BTW…sure do wish he would take down that picture of ‘big sis’ and that nekkid gal next to her…GAWD!
lukespapa on January 8, 2010 at 8:43 AM
Nope. In all honesty BB&T really played things on the up and up. The mortgage crisis of 2008 didn’t affect them like other banks. I was in business loans as an assistant and can recall many times that if the client didn’t have the numbers to back the loan they didn’t get it. Ticked people off but the risk was too high.
milwife88 on January 8, 2010 at 8:43 AM
That’s the NICE way of saying that – it should be:They tax the honest people to subsidize the Dishonest.
Fake8 on January 8, 2010 at 8:44 AM
Allison is a huge fan of Ayn Rand, so this must be killing him.
DrStock on January 8, 2010 at 8:45 AM
Anybody know what the specific consequences would have been for not taking any TARP money?
forest on January 8, 2010 at 8:47 AM
Two words for you to explain the whole TARP mess…. Goldman Sachs. Bernanke and Paulson hood-winked Bush. Orange jumpsuits one of these days, hopefully.
suzyk on January 8, 2010 at 8:50 AM
I submit that picture is NSFW – Not Safe for work except if you work for the TSA!
Just wait until Everyone has to go through those full body scanners – forget about privacy, no one is going have any secrets.
But Hey, at least were not hurting the murdering terrorist’s feelings, right?
Fake8 on January 8, 2010 at 8:51 AM
And in other news, John Allison received a foul smelling package of dead fish with a return address of R. M. Hmmmmmm……
conservative pilgrim on January 8, 2010 at 8:52 AM
Er, that would be R. E.
Need morning coffee.
conservative pilgrim on January 8, 2010 at 8:53 AM
Thanks for the link Ted. I didn’t know that the part of the Bernanke movie dealing with Obama’s approved new GM dealerships had been already been filmed.
Basil Fawlty on January 8, 2010 at 8:54 AM
Not really an option, not taking TARP. If the Fed, a primary regulator of Federally chartered banks, and the Secretary of the T. (a huge customer and major regulator of all banks) tell you to do something, as a bank exec you literally do not have a choice. Regulators are in banks all the time, and audits can go easy or they can go hard. Quoting the original post, “capische?”
MTF on January 8, 2010 at 8:54 AM
The other thing that these guys desparately want to project is that “everyone” is on board with this government intervention so we the people just need to trust the smartest guys in the room.
The smartest guys in the room apparently need prison.
And WTF has the media been (no answer necessary)?
All of a sudden all this coruption and criminal behavior can be discovered? Oh yeah, because maybe that messiah is not really a messiah………or something.
I need coffee.
ORconservative on January 8, 2010 at 8:58 AM
They hinted that if he didn’t, his bank would be regulated to with an inch of its life. And for a healthy bank like his, it was a big cost. You were forced to pay interest on a loan you didn’t need.
RBMN on January 8, 2010 at 8:59 AM
“We’re from the government, & we’re here to help you.” *facepalm*
jgapinoy on January 8, 2010 at 9:00 AM
O/T. Fox has the latest on unemployment:
http://www.foxnews.com/politics/2010/01/08/economy-loses-jobs-december-jobless-rate-stays-percent/
Revisions to the previous two months’ data showed the economy actually generated 4,000 jobs in November, the first gain in nearly two years, while it lost 16,000 more than previously estimated in October.
Messing around with October’s numbers gave them the out to not have to announce unemployment numbers as rising prior to the Christmas holiday. Also the 4,000 jobs gained in November is most definetly from seasonal hiring.
When you count everyone who gave up looking for jobs and have run out of unemplyment benefits, the real number is most likely hovering at around 20% now even though BLS says it is only 17.3%.
Johnnyreb on January 8, 2010 at 9:01 AM
The Washington Crime Family makes the New York Crime family look like pikers, even at the height of their power.
TheBigOldDog on January 8, 2010 at 9:02 AM
Morning Joe has an hourly segment in which some clown from Politico introduces its tops stories of the morning. Today, they’re breathless about Steve Schmidt’s 60 Minutes interview with Anderson Cooper in which Schmidt reveals that Palin asked Biden if she could call him Joe at their debate because in prep she kept saying O’Biden.
Earth shattering news. Problem is, as I learned over at NRO, Palin mentions the whole think in her book, which, I believe, has been out for quite some time.
Our media is like the dogs in Up: Squirrels! They all deserve to wear permanent cones of shame.
BuckeyeSam on January 8, 2010 at 9:02 AM
John Allison is a great guy and knows his stuff – I recommend you checking out his lecture at the Ayn Rand Institute on the what caused the financial crisis and possible cures. Long, but very informative and educational. He’ makes it all go down smooth.
Hint: The government appears to be MUCH more involved in the crisis than they would like you to believe.
Good Lt on January 8, 2010 at 9:03 AM
That pretty much sums up the entire Democratic platform. Screw the responsible to subsidize the irresponsible.
search4truth on January 8, 2010 at 9:04 AM
I think this is a negative viewpoint. TARP I actually had the right idea. The banks all go in. TARP II reversed it, and punitive talk started happening. Then, the “good banks” got out.
They were helping to move money through the system.
AnninCA on January 8, 2010 at 9:06 AM
Wrongo Ann, but keep thinking on it.
ORconservative on January 8, 2010 at 9:22 AM
Thanks for posting that link…I knew I’d seen that guy in a great video about the financial crisis but couldn’t remember where.
gwelf on January 8, 2010 at 9:22 AM
BB&T wasn’t the only bank forced to take TARP. I’m glad to hear that at least one of them is finally going public with this information.
behiker on January 8, 2010 at 9:41 AM
NOTHING is TOO BIG TO FAIL. And the government should have let them do just that!
GarandFan on January 8, 2010 at 9:43 AM
Hey, BB&T is now my bank. They bought out Colonial Bank who holds my home equity loan. Nice to know they are in good shape.
Dandapani on January 8, 2010 at 9:45 AM
It was actually much worse that even Allison relates here. The heads of the 10 biggest banks were literally locked in a room with Hank Paulson, with no staff and no counsel, and given agreements to sign to take the TARP money and give the government warrants for their banks. They were not even given time to consult their Boards of Directors, legal counsel, or senior management.
And all of this was done to save ONE bank — Citi. And that was not necessary, because Sheila Bair had already showed how to get even a huge bank sold without causing a run when she engineered the sales of Washington Mutual and Wachovia.
I think this all went down because the giovernment knew it had screwed up letting Lehma Bros. fail and they saw Citi as an other case of “too big to fail.” If they signled out aid to Citi, it might have caused a run by depositors, but the real risk was political – they didn’t want to be seen as playing favorites with Citi after letting Lehman die.
This was all done by the seat of their pants.
rockmom on January 8, 2010 at 9:46 AM
Goldman Sachs took their positions even further by creating “securities” known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short:
Treasury Secretary Hank Paulson, (CEO of Goldman Sachs at the time), had no problem with this legal manuver, which is why he took all his bonuses out in preferred Goldman stocks and then cashed out to the tune of $500 million saving $200 million in capital gains tax under the government’s one time exemption offered when a private citizen enters government service. Goldman later received $10 billion from the federal government and has since paid them back in full.
Ironically, Goldman continues to contribute millions to the Democratic Party.
Oh what tangled webs…….
Rovin on January 8, 2010 at 9:56 AM
This guy has been speaking out about this for a long time. He was on Bill Bennett’s show months ago.
Cindy Munford on January 8, 2010 at 9:57 AM
You mean like Schumer’s “criminal act” on IndyMac?
I still wonder what Cayman account has Schumer’s name on it.
Rovin on January 8, 2010 at 10:04 AM
Rockmom has it pretty straight as I understand it – the government wanted to assure the financial world that the entire system was safe, as opposed to putting out one fire after another. After Lehman collapsed, people didn’t know who to trust and by shoring up all the banks, whether they needed it or not, that stopped the guessing game about who was next to fall. It WAS strong-arming, though, and not fair to those who played it safe and were not in trouble (save for the fact that they would benefit from not having the entire financial system lock up or collapse).
That being said, I don’t know if it was necessary to force banks to take capital infusions – instead, the Fed or the Treasury could have said that they’d ensure the counterparty status on any trades made before X date, and the whole “domino-contagion” fear probably would have been stopped. This, however, would have introduced additional problems (i.e., the financial risk to the government if/when an additional institution failed).
I don’t agree with people who say “We should’ve let them fail” – that probably would have ended with the government having far greater control of the economy than it does today.
furytrader on January 8, 2010 at 10:05 AM
“Nice strong legs/kneecaps you have there, hate to see anything happen to them.”
Or liver, or kidneys.
One day Dear Leader may have needs of them….
Sir Napsalot on January 8, 2010 at 10:31 AM
Rockmom has got it pretty good. For those interested in more detailed analysis, I would refer you to MarketTicker.com.
I think Allison may have a case against the government for restraint of trade. He should have been allowed to not take TARP and to buy up the assets of any failed banks. By bailing out the looters, Allison’s ability to make a fair transaction was hindered.
riverrat10k on January 8, 2010 at 10:34 AM
You should put a permanent link to this post, because we’ll need it every time we’re told if we didn’t pass TARP, the banking system would have totally collapsed.
Chris_Balsz on January 8, 2010 at 10:55 AM
That’s just Bishop sarc’ing without a tag again.
Count to 10 on January 8, 2010 at 11:14 AM
My bank in CA is healthy. They never sold their mortgages on the secondary market, so they made sure borrowers were qualified to pay them back. I switched from Wamu to them because of their fiscal conservatsm–and lots of well dressed, white-haired customers inside. They know where their money is safe.
I won’t mention the bank’s name because then the guvmint will go after them with allegations of CRA violations, etc.
PattyJ on January 8, 2010 at 11:17 AM
I’m even more angry at the sleight of hand moves by Geihtner in NY.
elclynn on January 8, 2010 at 11:21 AM
I think you’re too honest to understand the scope of the threat. Remember Paulsen’s letter, about “if you choose to opt out, your regulator may require it”? And his threat to get a new board for B of A if the current board didn’t cooperate?
If the Federal Reserve chooses to “recommend” BB&T augment its reserves, how can BB&T dispute that?
If the Federal Reserve tells the press BB&T management is ignoring its recommendations to augment reserves, how can BB&T counter that?
Chris_Balsz on January 8, 2010 at 11:33 AM
It’s funny how some Republicans who favored the TARP back then pretend that they really didn’t now.
Let’s face it – all us unrealistic, uneducated, extremely radical free marketers who opposed the TARP vehemently …
Were absolutely right about it.
HondaV65 on January 8, 2010 at 11:35 AM
I remember how chummy Pelosi, and Paulson looked. How desperate Pelosi was to get this passed. I always felt deeper shennanighans were going on with this. Not to mention, wasn’t Goldman Sachs a huge contributor to Obama?
This reeks of corruption from start to finish, and Democrats stink of it, from head to toe. I wouldn’t be surprised to find out one day, they manufactured a lot of this, to insure Obama’s election.
capejasmine on January 8, 2010 at 11:58 AM
I really, really have to disagree with you there. It amounts to one looking away, making excuses, and rationalizing criminal activity. Would one be so bold, and callous as to look away if they witnessed a rape, or murder?
The top is off, and the worms are unleashed here.
capejasmine on January 8, 2010 at 12:01 PM
We’ve become a fascist country.
BowHuntingTexas on January 8, 2010 at 12:42 PM
There is a book out “too big to fail”
I also see the mark to market is how they clobbered banks into taking tarp money and setting a trap. The buy out after tarp was also a shakedown extortion of money. This banking relationship was right out of the Mafia hand book.
seven on January 8, 2010 at 1:03 PM
Whose money? That money BB&T had to pay as a penalty didn’t belong to the Government. The Government makes the banks take TARP, in essence getting seats on the board of every bank they forced to sign, and then makes the banks pay a premium to boot the government out. In the case of BB&T they got absolutely nothing other than the “right” to stay in business without being closed down by the regulators. They had to buy that “right”. This situation is like carbon credits — making someone pay for nothing.
unclesmrgol on January 8, 2010 at 1:10 PM
When normal justice fails, you will begin to see street justice.
SirGawain on January 8, 2010 at 1:33 PM
The same thing happened to Wells Fargo Bank – they didn’t need the money either, but were forced to take it unless they wanted their kneecaps whacked by the Lizzy Bordens of the Fed and Treasury Dept.
Texas Mike on January 8, 2010 at 5:36 PM