Values Versus Principles

While commenting on the propriety of banks (such as BBT) accepting federal money, someone wrote: " . . . I'd bet there's a lot more to the situation under the covers." There sure is.

Here's how it works(ed). ("BR" is bank regulator, from FDIC or SEC; "BP" is bank president -- not of a private bank, but of a publically traded one.)

BR: We would like you to accept this money and its conditions.

BP: But we're solvent and don't believe in such government programs.

BR: Yes, but the treasury secretary, Federal Reserve, FDIC, and SEC are 'encouraging' banks such as yours to accept the money.

BP: All well and good, but we'll respectfully decline.

BR: If you don't accept the money, the FDIC auditors will be there tomorrow to audit you.

BP: But they just audited us last week.

BR: In these risky times, the government must reassure the public. [Government auditors can show up anytime and demand access to a bank's books.]

BP: Well, that will be a hassle and waste of time, but so be it.

BR: This time they will find that your bank is undercapitalized, will have to report such to the proper government authorities -- all of which will undoubtedly be leaked to the markets and to the public.

BP: But how do you know that the government auditors will find problems? Just last week, they concluded that we were capitalized as required by the regulations. In fact, we're one of the most solvent financial institutions in the entire country. Depositors have been flocking to us from failed banks such as Wachovia.

BR: Things change. Auditors make mistakes. This time, they'll find problems.

BP: But if you do that, especially in this frenzied market, the rating agencies will drop us immediately to junk status, shareholders will sell at firesale prices, and there will be a run on the bank. Our shareholders will be wiped out, our employees will be unemployed, the people who could have gotten loans from us won't, and the company will be bankrupt.

BR: Maybe now you are sufficiently "encouraged" to accept our terms.

That is not fiction. That is what happened to BB&T and to many other financial firms. The CEO's of those companies saw what the federal government did to perfectly healthy companies such as Arthur Anderson -- and they did not want to suffer the same fate.

When the government coerces a man to choose between his values and his moral principles, you cannot judge his choice. "Morality ends where the point of a gun begins."