Courtesy of Razib
But some observers now say that Paulson’s injection of public capital was the beginning of unprecedented government involvement in the nation’s banking system, with consequences few understood.
“I think we nationalized the banks in the U.S. on that day,” former International Monetary Fund chief economist Simon Johnson says. “The government got a lot of say in how they are run, a lot of constraints, a lot of responsibility. A lot of downside risk was taken on that day.”
By December, Lewis was discovering what it meant to have the government as a partial owner. When fourth-quarter losses at Merrill grew to $15 billion, Lewis began to look for a way to get out of the deal. But in tense negotiations with government officials, Lewis was told he had no choice. If he did not go through with the merger, regulators threatened to change the bank’s management.
“Ken Lewis blinked, the full force of the government is being brought upon him. The rules of the game have changed,” Wall Street Journal reporter Dan Fitzpatrick says. “Ken Lewis is on top of the financial services world, but he’s not in charge. The government holds all the cards at the end of the day.”
Of course, treason charges against Geithner won’t involve this (the establishment of Socialism was (a) a policy choice under (b) the previous administration), but his siding with the tribal raid against the US government in early 2009. Criminal charges, which are much more likely to be brought, are more mundane, and involve collusion, racketeering, insider-trading, and so on.