An Offer They Couldn’t Refuse

I haven’t seen much commentary on the truly frightening account in last Wednesday’s WSJ, “At Moment of Truth, U.S. Forced Big Bankers to Blink,” of the meeting between Paulson, Bernanke, and crew and the heads of the major banks the government is (partially) nationalizing. “We’re from the government. Here’s our purely voluntary offer.” Yes, of course, Godfather! The only thing missing from the story is the horse’s head.

Messrs. Paulson and Bernanke had called one of the most important gatherings of bankers in American history. For an hour, the nine executives drank coffee and water and listened to the two men paint a dire portrait of the U.S. economy and the unfolding financial crisis. As the meeting neared a close, each banker was handed a term sheet detailing how the government would take stakes valued at a combined $125 billion in their banks, and impose new restrictions on executive pay and dividend policies.

The participants, among the nation’s best deal makers, were in a peculiar position. They weren’t allowed to negotiate. Mr. Paulson requested that each of them sign. It was for their own good and the good of the country, he said, according to a person in the room.

The meeting ended an hour later. Every one of the nine CEOs signed the term sheet.

The WSJ treats this as a cute story about Paulson out-maneuvering a group of tough, clever, experienced CEOs. But anyone who knows anything about the State sees what it was: an act of extortion by the world’s greatest extortioner.