The F Word: The American Way

The American way is just naturally the corporate way. That’s what Henry Paulson would have you believe.

Both Europeans and American governments are investing in struggling banks right now. But the approach is strikingly different: In Europe, the infusion of capital into banks has come in exchange for ownership and some conditions. Representing the taxpayers, European governments have said, why shouldn’t we get the best bargain we can get. For example, in Europe the preferred bank shares governments are buying carry a requirement that no common shares be paid dividends until the government gets its money back.

Not here. Here, our government is buying non-voting shares (huh?). American taxpayers don’t get a voice in the bank’s affairs. Nor does Washington require, as European governments have, that the purchase of shares be accompanied by a seat on the board.

That just wouldn’t be the American way, says Treasury Hank.  In fact he’s gone to great pains to downplay direct government investment in banks, and to play up the ways in which the US, is just, well, different. He makes it sound like a tenet of religious — or national faith: The US is culturally, historically, and financially unique. American taxpayers don’t expect to tell banks how to run their business, we’re told.

Oh really? Some taxpayers expect just that. Imagine Paulson the person (not the Treasury Secretary) for an instant. Can you imagine Paulson the person – with $700 million – making the same kind of deal for himself that he’s made for US?   Can you imagine him putting up money for non-voting shares? Would he have done that for his bank, Goldman Sachs? Exactly.

Paulson’s American way is only the Treasury Secretary’s way. It’s not the investor’s way. American investors are more like the French.