Posts Tagged ‘Nationalization’

The news for Bank of America and Citibank  today is grim. Their stock values are tanking, investors have lost confidence, and many fear nationalization.  I guess they think that nationalization would cause them to lose all of the value of their investments in these banks. Wait a minute. In the last five years Bank of America stock has dropped about 92% and Citi has dropped about 96%. How much more is there left to lose? These two banks, and others too, are on life support.  They are being fed on an I-V of our tax dollars, otherwise known as the Great Bank Bailout.  It’s time to take a step back and review the patients’ prognosis.

They are suffering from massive infections.  Their circulatory systems are infected with toxins for which we have no cure.  It’s like bank-eating bacteria.  These patients are going to die without more truly massive transfusions, but no one wants to donate any more blood. And why should they? What have the banks done for us lately? Aren’t they largely responsible for this massive infection that has crept around the world, destroying the economies of country after country?  Can massive blood infusions even save the patients? They not only need new blood, they also need some sort of antibiotic to kill the infection and to prevent future infections. But the banks say they’ll take the blood, but their religion prevents them from taking antibiotics.  No medicine for them; just blood please.

It’s time for the doctor to tell these poor infected banks the truth.  They’re going to die.

OK. So now what do we surviving relatives do? Should we immediately take over the banks, i.e. nationalize them, before they die? And if we do that, what to we do about the infected, toxic tissues in their vaults?  And what about hidden toxins we may not even know about yet? Does it make sense to pour new blood into these son-to-be dead banks and then get the infection ourselves? No, it doesn’t. It’s like there’s plague on Wall Street.  We can’t help them anymore.  Let them and their investors go and meet their maker.

Meanwhile, while the banks take their last, gasping breaths, we (meaning the government – remember government of the people, by the people, and for the people?  That’s us.) start our own National Banks. We start fresh with new blood, that is to say: money.  Sure, it’s our tax dollars, same as in the bailout thing.  But this time we are not buying toxic waste or flushing money down the toilet. We are creating our own banks with no toxic assets, nothing hiding in the closet, nothing lurking in the dark corners. Just a brand new, government-operated set of banks that will meet all of our banking requirements in a completely honest way while the sick banks dissolve into pools of coagulated ooze.  Thankfully, unless we are investors in those pathetic banks ourselves, its not our problem.

Now here’s the real beauty of my plan: the Republican Party has to wholeheartedly endorse it because it is founded on two of their fundamental guiding principles: 1) You Are On Your Own 2) We are not paying to get you out of a mess you got yourself into.

Imagine that. I kind of always thought of myself as a Democrat, but now that I look at it this way, maybe I have some Republican values too.  Maybe I’m actually more like President Obama: I think I have found a truly bipartisan solution to the banking crisis.  President Obama, are you listening? I think the Republicans will go along with us on this one. No, really. How could they say no?

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It seems pretty clear that we are entering a new phase in the financial crisis.  The U.S. banking system, having already received $350 billion in TARP bailout money is failing again – even though they never lent the $350 billion to customers who applied for new loans.  This new phase of bank meltdowns is related to businesses defaulting on commercial loans.  Perhaps this explains why the banks didn’t loan the original $350 billion – they all knew that there was more bad news to come and that the damage from the housing bubble would flow over to the general business sector.

Now, in the space of only a few days, there is bad news about Citibank, Bank of America, JP Morgan Chase, and others.  They all need a lot more money – taxpayer money to be exact.  It looks like they will be needing the remainder of the authorized TARP funds and maybe a lot more – who knows.  Certainly the banks won’t be telling us the facts until the last minute.  So what do we do?  Do we just keep shoveling money into these banks and let them just squirrel it away, afraid to lend it to anyone and thus ensuring that the economy will continue its death spiral?

There is an alternative to simply giving away all of our tax dollars to the wealthy people who own the banks.  Nationalization.  I know, I know…  The banks and the rich folk don’t like the idea.  Nevertheless, there are more and more voices saying the time has come for the government to really step in and sort out this mess because the people who run the banks are really only interested in saving their money and not in saving the economy.  It might be helpful to look at what is happening in Europe for a moment.   Yesterday, the Irish government nationalized the Anglo-Irish Bank, one of the largest banks in Ireland.  They are following the precedent set by the British government last year when they nationalized the Northern Rock Bank at the beginning of the real estate meltdown.  Northern Rock is now a very stable bank.

This is a good time to have a discussion of the pros and cons for nationalizing the U.S. banks that are in major trouble.  It is also a good time to discuss the whole nature of our banking system and why we have exclusively privately owned banks anyway.  Why shouldn’t the government operate a system of banks, sort of as a non-profit utility?  Are we afraid that would cut into the profits of the private banks and the millions of dollars of profit that goes to their owners and employees?

We are approaching a decision point.  Our banks have become dysfunctional.  They don’t loan money and they don’t make money.  So, I have to ask: what useful purpose do they serve or are they likely to serve in the near future?  Our economy drifts along toward another precipice: the complete collapse of our banking system.  Only the government has the ability to get us out of thus situation now. The real question is this: should we continue giving our tax dollars to these banking businesses or should we just have our own national banks that are really owned by the American taxpayer.

I heard there is a joke going around Wall Street saying that The Bank of America really is the Bank of America now, since the government already owns so much stock in the company.

I’m thinking that maybe it’s not a joke; maybe it’s a solution.

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