Wall Street Gets the Gold; Main Street Gets the Shaft!

We all suspected this, and now it is public. More than 1,000 community banks suffered severe damage as a result of their GSE preferred stock being wiped out following the nationalization of Fannie Mae and Freddie Mac. Now, in the latest Bloomberg investigation of the financial crisis, we find out that then-Treasury Secretary Henry Paulson tipped off his Wall Street buddies on the plan. And anyone who thinks that Wall Street did not act on that information is smoking some powerful dope.

Meanwhile, Paulson was making public statements that Fannie and Freddie were “stable” and that their capital was “adequate.” Why didn’t he tip off the more than 1,000 community bank CEOs whose holdings were about to be wiped out?

At the time, we had our suspicions, but no proof. Well, it looks like we community bankers were right all along. I guess it’s hard not to know when you’re getting screwed.

Of course, while this inequity is outrageous, it’s far from the first time community banks have gotten the shaft. Any wonder we want our own voice in Washington? Any wonder why we are fighting for fair treatment for Main Street when Wall Street gets a break after wreaking financial havoc?

Once again Wall Street gets the gold and Main Street gets the shaft. Crony capitalism is alive and well.

8 thoughts on “Outrage

  1. We would love a portion of the $1mm we got hosed on! Even a token amount. Not only did we suffer the loss (while being profitable for the year, mind you), we have lost faith in this “system” and manage our bank to best serve the community while viewing govt. and the mega-banking system as adversaries. So it goes. A bit of irony to throw in the pot… our external auditor strongly recommended FNMA Preferred stock. Generally, an auditor should be reining in potentially bad choices/decisions… Hm.

  2. We will not get rid of Crony Capitalism until we the voters can put term limits on Legislators.

    Two four year terms same as President with an opportunity to run again after eight years of serving outside of Government employment. Our Legislators need to figure out what is really going on on “Main Street” USA. Most don’t have a clue they are so settled in their Government guaranty and pensions they could care less about the American Worker.

    • One example and a suggestion: in Mexican government there’s no-reelection of senators, representatives, governors and nation presidents, they need to be renewed every single time they accomplish their terms… if we would do the same here in US, the congress, government and states will “refresh” with new people and new ideas, more progressive and innovative no matter the party or ideology… God bless!

  3. the only way we can stop such insider trading and absurdity is have money spent on press. we need to advertise on cnn, wsj on what paulson did. did you see wsj did not cover ? only media will get their attention in this election year. are we spending money on media? it is powerful.

  4. Joe Hudson says:

    December 3, 2011

    Mr. Bowers is completely correct. Most in Congress have not a clue about what the average American outside their political safehaven are experiencing right now. And furthermore, they don’t care as long as they get their guaranteed paychecks, guaranteed healthcare, and graranteed pensions. They have many other benefits that we don’t even know about, many of which are illegal if we get them. Term limits is the only answer.

  5. The G-fee increase to pay for the payroll tax cut further jeopardizes the GSE’s conservatory end. This also reduces the chance that GSE preferred shares are made whole or anything close to it. To allow these G-fee increases to be spent on appropriations while not allowing this revenue to be applied to the GSE loans is another civil wrong. Additionally, the 10% dividend on Sr. Prefs to Treasury are much higher than loans made to the Large banks during the crises.

    With this act, seems like Congress is carrying on Treasury Secretary Henry Paulson’s inequity.

    What can be done to make GSE Pref. shareholders whole?

  6. GSE’s combined profits of $50 + bil for the quarter they can easily pay qt dividends of 1/2 bil that would likely increase pref share price back to par ($36 bil)

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