How Deals Are Made in the USA

In a previous post, I wrote about feeling as though I was living in Orwell’s 1984. If perhaps, you felt that I was being overdramatic, consider this New York Times article from Oct. 15, 2008:
Drama Behind a $250 Billion Banking Deal by Mark Landler and Eric Dash.

“The chief executives of the nine largest banks in the United States trooped into a gilded conference room at the Treasury Department at 3 p.m. Monday. To their astonishment, they were each handed a one-page document that said they agreed to sell shares to the government, then Treasury Secretary Henry M. Paulson Jr. said they must sign it before they left.”
“The chairman of Wells Fargo, Richard M. Kovacevich, protested strongly that, unlike his New York rivals, his bank was not in trouble because of investments in exotic mortgages, and did not need a bailout, according to people briefed on the meeting.”
“What happened during those three and a half hours is a story of high drama and brief conflict, followed by acquiescence by the bankers, who felt they had little choice but to go along with the Treasury plan to inject $250 billion of capital into thousands of banks — starting with theirs.”
"’It was a take it or take it offer,’ said one person who was briefed on the meeting, speaking on condition of anonymity because the discussions were private. ‘Everyone knew there was only one answer.’”
“No one expected him to present his plan as an ultimatum.” (emphasis mine, excerpts taken in order of appearance in the article)

All of the italic text is from the New York Times article. The thing that concerned me the most about this article was how positive the overall tone was in the article. I understand that the New York Times was praising Uncle Joe Stalin during and immediately after WWII. I myself have said that if the New York Times were any more slanted, it would be an overhanging cliff. Still, I just don’t understand how they can be so uncritical of a closed meeting where CEO’s are given no option about selling their stock. These were not just regular “stocks” either. These banks were required by the Federal Government to sell “preferred shares that pay a 5% dividend, rising to 9% after five years.”
Can I get a deal like the Treasury? I want a deal where I walk into a meeting and tell the owner of a local business that they have 3 ½ hours to sell me a part of their business where I get 5% of the profits. Oh yea, and after 5 years if the business owner has not paid me off – I mean, purchased the “shares” back from me then my percentage of the profits will go up 4%. Let me make this perfectly clear. Even if the local business owner signed the contract, IT WOULD BE NEITHER LEGAL NOR BINDING.The New York Times did not mention anywhere what could or would have happened if a bank CEO had refused to sign. The American People will never know what threat was used – if it were a fine, jail time, complete government takeover of the bank? We do not know. We will never know.
If you have friends that want “more government oversight” of stock markets, mortgage lending, accounting standards, toothpaste, or Fairy Godmother Unions, remind them that the banking CEO’s were taken behind closed doors and given an “offer they could not refuse.” Make it clear that while we don’t believe that Mr. Paulson had US Marshalls stand behind each CEO and tell them that either their signature or their brains would be on the contract; We the American People will never know.

One of the dangers of sleeping out under the stars is that sometimes you wake up with a rattle snake curled up next you in the morning. The nine major banks in the United States just woke up to a beautiful dawn sky – asking themselves why didn’t I set up the tent? They can’t go relieve themselves, take a deep breath or scratch their butt. If they make a move the Fed does not like, they may be bitten by one really nasty snake.