What Paulson, Ben, and The Illuminati Bankers Actually Said Behind Those Closed Doors

I had a spy fly on the wall at the big explicit Illuminati meeting yesterday between Paulson, Ben, and the nine biggest surviving banks in the country.

And so let's actually picture the discussion in that room. The very CEOs who drove these giant banks into insolvency are sitting around with their former partners/co-workers/friends from the Treasury and the bookish Fed heads. These guys lock themselves in a room to discuss how best to divvy up the $700 billion blank check that the socialist Republicans and Democrats in power just handed them.

I can hear it now:

CitiGroup (C) CEO Vikram Pandit, "Guys, first and foremost, we need to protect the taxpayers and stabilize the financial markets."

Treasury Paulson, "Yeah, exactly. So here's what we're thinking -- I'll take the $250 billion installment that we just got from the taxpayers and we'll give it to you guys in exchange for some notes that would probably go up in value if you guys don't blow yourselves up too quickly over the next few years again. Do you think you can stay solvent for a few more years? You could try lending the money out, I've read in some papers that Ben wrote that lending via fractional reserve banking -- lending out many more times the amount of capital that we give you, in hopes you don't have another run on your bank -- can even make you some money."

JP Morgan (JPM) CEO James Dimon, "Yes, I think giving us the money for nothing -- not even making us trade in all this junk that's made us insolvent is definitely the best way to protect the taxpayer up front...oh, and of course to stabilize the banking industry. Yes, give me the money and everything will be much better for everybody in the world."

Well Fargo (WFC) CEO Richard Kovacevich, "Yes, that logic makes sense to me. Give my bank's shareholders money for some of those preferred share thingees and then the system will be fine. Tell them, Ben."

Fed chief, Ben Bernanke, looking up from his Spiderman comic book neatly folded inside of his giant text book in the same way he's been tricking his students and before that his teachers for years, "Well, if we do nothing, I think the world will fall apart since nobody in America is creative or entrepreneur anymore. And if we create money out of thin air and just give it to the banking industry, then we hurt nobody. Indeed, we can erase the Gotham banking industry's trillions of dollars of losses and pretend that it never happened. Nobody will be hurt and everybody in society will benefit if we give these guys $250 billion for free -- yeah don't even bother punishing the shareholders who got to divvy up trillions of dollars of false profits in the good times. That will hurt society. Pain is bad. Money is good."

Paulson, dictating to his secretary, a sultry 30-something who's penchant for black leather boots and off-beat outfits make her hot despite her lazy left eye, "Take this down and let's send this out to public. They are gonna be pumped that we figured out that just giving the money to the very banks and people who created this crisis and not punishing any executives or shareholders is the best way to fix it. Confidence, here we come!

"The minimum subscription amount available to a participating institution is 1 percent of risk-weighted assets. The maximum subscription amount is the lesser of $25 billion or 3 percent of risk-weighted assets. Treasury will fund the senior preferred shares purchased under the program by year-end 2008. Institutions interested in participating in the program should contact their primary federal regulator for specific enrollment details."

Paulson drops the lemon he always requires in his Diet Coke on his tie and loses his thought for a moment. He repeats the last line, "Institutions interested in participating in the program should contact their primary federal regulator for specific enrollment details."

One of his aides steps up, hands him a piece of paper and whispers in his ear. Paulson says, "Ah, dammit fellas, he's right. I gotta pretend that you can't get paid tens of millions of dollars a year as an executive running these banks while giving you free tax payer money. Let's add this little gobbledygook in there and we'll just work around it later, okay?

"The financial institution must meet certain standards, including: (1) ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial institution; (2) required clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains or other criteria that are later proven to be materially inaccurate; (3) prohibition on the financial institution from making any golden parachute payment to a senior executive based on the Internal Revenue Code provision; and (4) agreement not to deduct for tax purposes executive compensation in excess of $500,000 for each senior executive. Treasury has issued interim final rules for these executive compensation standards."

Interim Assistant Secretary of the Treasury for Financial Stability, Neel Kashkari pulls his shirt down from off of his head where he had been zenning out pipes up saying, "Hey, if we call the nine firms that would be insolvent without this program 'healthy', I bet that might help get confidence back into the system."

Nine large financial institutions already have agreed to participate in this program, moving quickly and collectively to signal the importance of the program for the system. These healthy institutions have voluntarily agreed to participate on the same terms that will be available to small and medium-sized banks and thrifts across the nation.

So we've gone from saying we were going to extract maximum pain on those who took risks of ownership of shares (shareholders) in any financial institutions that took in tax dollars in the bail out plan to simply handing them the money.

The WSJ reports today that: "Some of the big banks were unhappy about the government taking equity stakes, but acquiesced under pressure from Mr. Paulson in a meeting Monday."

I happen to have read the actual TARP bailout bill, and it had this little section in it:

NECESSARY ACTIONS.—The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation, the following:

Designating financial institutions as financial agents of the Federal Government, and such institutions shall perform all such reasonable duties related to this Act as financial agents of the Federal Government as may be required.

Can't imagine there weren't any threats of nationalization to the banks that "were unhappy about the government taking equity stakes, but acquiesced under pressure from Mr. Paulson in a meeting Monday." Nah, surely not. I'm sure that just because Hank Putin/Paulson has the right to deem any bank an instant financial agent of the US -- whether justified or even if just because Mr. Paulson doesn't like it's name -- yeah, I'm sure he'd never actually use that as a political and profit-seeking tool for him and his cronies. Right? Right? Hello, is this thing working?

Feeling better about the outlook for economy and the credit crisis now? No, not so much?