FNC's Napolitano Claims Bush Administration Committed 'Extortion' Against Banks
It's no secret the Bush administration used fear tactics to push the $700-billion Troubled Asset Relief Program (TARP) through Congress last fall. Both members of the House and the Senate have come out after the fact and disclosed the details.
However, the method the Treasury Department employed to get banks to go along with the TARP bailout breached legal boundaries to the point of "extortion," according to Fox News Senior Judicial Analyst Andrew Napolitano, a former Superior Court Judge for the state of New Jersey.
Napolitano told viewers on FNC's April 1 "Studio B" that he had a conversation with a head of $250-billion bank that explained the federal government, under the threat of an audit, forced him to accept TARP funds.
"This person runs a bank that's worth about $250 billion, it has no subprime loans, it has no bad debts, wasn't involved in credit default swaps," Napolitano said. "It didn't need any money. It didn't ask for the money and didn't want it. The FDIC with Treasury backing - officials from both the Federal Deposit Insurance Corporation and the Treasury said if you don't take this money, we will conduct a multi-year public audit of you."
Though the bank was solvent, as Napolitano explained, fighting the government on the terms wasn't worth in the final cost-benefit analysis and the bank's board decided to accept bailout money, despite the protests of that bank's head and having the government become part-owner of the bank.
"It would cost them millions in employee time to give the government the documents it wanted, it would cost terrible publicity. The terrible publicity and that would mean a loss of business," Napolitano continued. "He begged his board of directors to let him tell the Feds to go take a hike. The board caved. He was forced - the board was forced to issue a class of stock just for the federal government. The federal government owns 2 percent of this huge bank. As a result of that minority ownership, they now want to control salaries. They want to see his books and they want to tell him who he can do business with."
But as Napolitano explained, the tactic the government employed was nothing short of extortion, under its legal definition. And, as a consequence of the government having a stake in the bank, it is susceptible to having the government dictate business decisions and employee compensation.
"Extortion - this occurred in September of 2008," Napolitano said. "Extortion is an attempt to control somebody else's free will by threatening to perform a lawful act. Is an audit lawful? Absolutely. Is the threat to engage in an audit in order to force them to sell stock to the federal government lawful? Of course not! It's a crime. That happened in September of '08 under the Bush administration. In March of '09 is when the Treasury said we own 2 percent, we're going to tell you how to run the place."
News outlets have analyzed business spending by AIG and others since TARP, but have paid little attention to the role of government in the bailout. Former Merrill Lynch CEO John Thain left Bank of America after spending more than $1.2 million decorating his office in 2008 which drew media and political criticism. Even President Barack Obama complained about the expense.Even liberal New York Times columnist remarked that the TARP plan was doomed to fail under these conditions on Bloomberg TV March 24. The populist backlash the federal government has succumbed to is making some banks not want to accept TARP