U.S. Clears Path to Bank Takeovers
Obama’s Revised Plan for Industry Aid Could Result in Nationalization
By Binyamin Appelbaum and David Cho
Washington Post Staff Writers
Tuesday, February 24, 2009; A01
The Obama administration yesterday revamped the terms of its emergency aid to troubled financial firms, setting a course that could culminate with the government nationalizing some of the country’s largest banks by taking a controlling ownership stake.
Administration officials said the change, which allows banks to repay the government with common stock rather than cash, is intended to give banks more capital to withstand a continued deterioration of the economy, and not to nationalize the banking system.
. . . The move is a significant gamble. The magnitude of the effort could underscore the severity of the crisis, further alarming investors. The government could also forego billions of dollars in dividend payments.
. . . Administration officials said the goal of the revised program is to give banks a short-term boost that avoids the need for a more dramatic federal intervention.
As for alarming investors, why should they not be alarmed? As a matter of fact, the current Dow Jones numbers reflect the fact that they are way past the curve, alarm-wise and ought to catch up with the rest of the country–primarily by paying their share of the losses. Investors have not yet begun to smell the coffee.
This takeover option is still far less straightforward than simply franchising Federal Banks, funding them with the same largesse we are so willing to throw in the direction of the banksters. Then allow those banks that fail to survive go down the tubes–a useful message for the future of banking in this nation that no one is too big to fail.
Many have pumped their way on loose oversight steroids and become too large to exist. Does anyone really think Bank of America or Citibank are good ideas?