The bitter von Pepe sends this John Taylor blog post from early July:
In a recent speech at Stanford (video here) former Wells Fargo Chairman and CEO Dick Kovacevich told the full story of how he was forced to take TARP funds even though Wells Fargo did not need or want the funds. The forcing event took place in October 2008 at a now well-known meeting at the U.S. Treasury with Hank Paulson, Ben Bernanke, as well as several other heads of major financial institutions.
In his speech, Kovacevich first described how he and the other bankers were told at that meeting that they had to accept the funds. He then paused and said to the Stanford audience: “You might ask why didn’t I just say no, and not accept TARP funds.” He then explained: “As my comments were heading in that direction, Hank Paulson turned to Chairman Bernanke, who was sitting next to him and said ‘Your primary regulator is sitting right here. If you refuse to accept these TARP funds, he will declare you capital deficient Monday morning.’ This was being said when we were a triple A rated bank. ‘Is this America?’ I said to myself.”
Kovacevich, in the Q&A period of his talk, apparently explained that he and others in the financial industry had been quiet about all this, because they didn’t want the government to crack down on their companies for talking back.
Now I’ve heard this tale before, but until this morning I never reflected on one crucial aspect of it: Ben Bernanke is sitting there, knowing that Paulson is relying on him–the Bernank–to punish people for not taking TARP funds. In other words, Bernanke didn’t spit his water out and say, “Hank, I do declare! The very idea that I would adjust my opinions on capital deficiency in this way! I am a former academic, this conversation disgusts me.”
So for all of the naive bloggers out there, who just can’t understand why Bernanke doesn’t implement the policies he advocated when he was writing journal articles… Is it because he is just a kind of shy guy?
No, I don’t think that’s it. Here is the “model” I think Bernanke is using.