A document indicates that US banks were instructed to accept bailout money under the Bush administration, or face ‘exposure’.
Former Treasury Secretary Henry Paulson had warned nine US banks they would be obliged to accept USD 125 billion in government investments under any circumstances, according to a memo, published by Bloomberg on Wednesday.
Information only recently made available quotes Paulson as saying “If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance,” to a gathering of lenders’ chief executive officers on 13th October, 2008.
“We don’t believe it is tenable to opt out, because doing so would leave you vulnerable and exposed,” he said.
Ten days earlier, the Bush administration had proposed buying USD 700 billion worth of bad mortgage debts (also know as toxic assets) – a bill that was approved by Congress.
The recent revelation has sparked controversy among many bankers and legal experts.
The president of Judicial Watch, Tom Fitton, termed the Treasury arrangement ‘thuggery’. “Most Americans are going to be uncomfortable with the government forcing the banks into this arrangement,” he said, Bloomberg reported.
Andrew Williams, a spokesman for the Treasury, has not commented on the issue.