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A $250B Offer They Couldn't Refuse

In brief meeting, Paulson gave banks a 'take it or take it' deal

By Jason Farago,  Newser Staff

Posted Oct 15, 2008 7:47 AM CDT
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(Newser) – When the CEOs of America's 9 largest banks arrived at the Treasury at 3pm Monday afternoon, they each received a draft one-page statement promising to sell shares to the government. By 6:30 they'd all signed them. The New York Times reconstructs the meeting, during which Henry Paulson wore down bankers' fears and convinced them that the recapitalization wasn't just a good move, it was inevitable.

The treasury secretary played hardball, with one banker calling it "a take it or take it offer." At first some bankers, especially the head of the relatively stable Wells Fargo, bridled at government intervention and the limits on executive pay. But as they discovered the attractive terms—far more generous than what Warren Buffett offered Goldman—the deal was largely done; the head of Bank of America said that if they were to reject it on the compensation issues, "we are out of our minds."

Treasury Secretary Henry Paulson walks from the podium as Fed Chairman Ben Bernanke approaches during a press conference at the Treasury Department in Washington, Tuesday, Oct. 14, 2008.
Treasury Secretary Henry Paulson walks from the podium as Fed Chairman Ben Bernanke approaches during a press conference at the Treasury Department in Washington, Tuesday, Oct. 14, 2008.   (AP Photo/Gerald Herbert)
Treasury Secretary Henry Paulson speaks during a press conference at the Treasury Department in Washington, Tuesday, Oct. 14, 2008.
Treasury Secretary Henry Paulson speaks during a press conference at the Treasury Department in Washington, Tuesday, Oct. 14, 2008.   (AP Photo/Gerald Herbert)
Bank of America Chairman Kenneth Lewis, speaks on the changing financial services industry at the National Black MBA Association 30th annual conference, Friday, Sept. 19, 2008, in Washington.
Bank of America Chairman Kenneth Lewis, speaks on the changing financial services industry at the National Black MBA Association 30th annual conference, Friday, Sept. 19, 2008, in Washington.   (AP Photo/Manuel Balce Ceneta)
In this Jan. 18, 2008 file photo, Chairman and CEO of Morgan Stanley John J. Mack is photographed during a news conference in New York.
In this Jan. 18, 2008 file photo, Chairman and CEO of Morgan Stanley John J. Mack is photographed during a news conference in New York.   (AP Photo/Mary Altaffer, file)
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An hourlong meeting that changed finance
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Paulson hails a 'major step forward'
Reuters

After the injection, Paulson's hand is weak
Bloomberg

 
Bank of America • CEO • Henry Paulson • Wells Fargo • Treasury Department • financial crisis • recapitalization

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