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Doc Cleveland: Police, Danger, and the Social Contract
Banks are chafing under Federal bailout terms, according to today's New York Times. Fearing that they will be forced to sell off toxic assets and curtail executive compensation, some banks are trying to return bailout money. But there's a catch. In order to receive the bailout loans, the banks had to grant the Federal Government stock warrants. The warrants give the Federal Government the option to buy stock in the company at a specified price. The Treasury will only allow the banks to opt out of the bailout program if they buy back the warrants, a steep penalty.
And the bankers don't like it one bit. Last month, three C.E.O.'s of large banks asked President Obama to tell the Treasury not to exercise the warrants. Douglas Leech, the C.E.O. of a small West Virginia bank that wants to repay its bailout loan, was so incensed that he used the U-word:
What they did is wrong and fundamentally un-American. Even though the government told us to take this money to increase our lending, the extra charge meant we had less money to lend. It was the equivalent of a penalty for early withdrawal.
I feel your pain, Douglas Leech (great name, btw) and other unnamed C.E.O.'s. When the government made you take its money, you didn't expect any annoying conditions. The government is supposed to be the nice Sugar Daddy, not the mean Money Lender. That's your job. And now that you've discovered that the government isn't as generous as you thought, you should at least be able to get out of your contractual obligations. We're in a recession for crying out loud; it's an obligation-free-zone. Except of course for mortgage defaulters and overpaid executives.
PS Fox News feels your pain too.