“Well, whatever you want to call it,” said Pelosi. “If we are strengthening them [banks], then the American people should get some of the upside of that strengthening. Some people call that nationalization."
Today I received the following article link in my daily round up of news that I torture myself with each morning:
Nationalization Gets a New, Serious Look
Only five days into the Obama presidency, members of the new administration and Democratic leaders in Congress are already dancing around one of the most politically delicate questions about the financial bailout: Is the president prepared to nationalize a huge swath of the nation’s banking system?
Privately, most members of the Obama economic team concede that the rapid deterioration of the country’s biggest banks, notably Bank of America and Citigroup, is bound to require far larger investments of taxpayer money, atop the more than $300 billion of taxpayer money already poured into those two financial institutions and hundreds of others, The New York Times’s David E. Sanger reports.
At first read, surprisingly for a New York Times article, it seemed fairly balanced. However, as I re-read it I came away with the feeling that the author was laying the groundwork, i.e., Obama really doesn't want to nationalize the banks, but the situation is worse than he thought so he'll be forced to take this drastic step.
“I would guess that sometime in the next few weeks, President Obama and Tim Geithner,” he said, referring to the nominee for Treasury secretary, “will have to come out and say, ‘It’s much worse than we thought,’ and just bite the bullet.”
There is a suggestion that IF Obama does go down the nationalization path it may only be for a few banks and that it may only be for a short time.
The argument in favor of nationalization, even a brief nationalization of a
few months or years, is straightforward: It might be the only way to pull
America’s largest financial institutions out of the downward spiral that makes
it enormously difficult to raise the capital they need to keep operating.
It's that old slippery slope. Look at history. Once government gets involved their tentacles tighten, they don't release their prey. Using another, hopefully less plausible, comparison dictators and the like often start out as saviors. They make this little change here, that change there and the next thing the citizens of their country realize, the dictator's new government has a stranglehold on everything.
The article did present a lot of good arguments as to why the Obama administration might be trying to steer clear of going the nationalization route. It seemed to me though, that the arguments were just included so we'd understand that it must be really, really bad if Obama is forced to make the horrible decision to nationalize banks given all the negatives. It set the stage for the masses to applaud Obama and friends for being forced to do this for the good of the country -- if it occurs.
In another article from Bloomberg (see link below) the author again seemed to be trying to state both sides of the issue while setting the stage for the inevitability of nationalization:
William K. Black, former lawyer at the Federal Home Loan Bank of San Francisco and Office of Thrift Supervision, said the Treasury could do better by assuming control of the companies and removing existing management altogether. By trying to avoid nationalizing the institutions, the government is wasting money, he said.
"It's insane to leave it in the control of the people who have every incentive to cover up the scale of the losses," said Black, a professor at the University of Missouri-Kansas City School of Law. "You're deliberately negotiating a bad deal for the American people by not getting an appropriate return for the risk you're taking."
"If you took a nationalization policy, you would at least create some degree of certainty because now you know the government is going to stand behind these institutions," said Jacques, 49, who was an economist with the Treasury
Department for 14 years before becoming a finance professor at Baldwin-Wallace
College in Berea, Ohio.
And now? "It's almost like some kind of weird partial nationalization," he said.
So am I just over-sensitive to the potential subtleties in these articles? Is the media partnering with Obama in the softening of the American mind? Is nationalization of banks around the corner? Is the current economic downturn going to lead to the country embracing a change in our fundamental beliefs with open arms?
I guess we'll find out in one of our tomorrows.
Treasury's demands on banks seen as nationalization
(Bloomberg News Feed)
WASHINGTON — The U.S. government's decision to pledge billions of additional dollars with strings attached to Citigroup Inc. and Bank of America Corp. may be nationalization by another name, according to former bankers and regulators.
Faced with pressure from lawmakers, banks have shaken up management, eliminated executive bonuses and staff and canceled conventions. They'll be forced to do monthly reports on how they've boosted lending while slashing quarterly dividends to 1 cent a share for three years.