Why won't Obama nationalize the banks?

[EmilyAnne]

Do you think he should?

[Demeter]

1. Absolutely, and the Sooner the Better

Because if it's done sooner, the Treasury will be much less depleted. Also, the economy will get a breather.

[EmilyAnne]

4. Why do you think he hasn't done it? I agree with everything you wrote, but I'm wondering if I've

missed some good reasons for not doing it. Or good alternatives that I don't know about.

[Demeter]

10. Is a Puzzlement

Bad advice from the people he appointed. Pressure from Big Money, soon to be much smaller money. International blackmail. Fear of the Chicken Little effect internally, in the country (or externally).

He's a constitutional lawyer, not an economist nor a business type. He's not been personally whipsawed by the economy because his career has been largely outside it, in the protected professions. He's not invested, started a business, worked in manufacturing, etc.

He's on a steep learning curve, surrounded by the Chicago School of economists who are down, but not yet out. He'll either wise up very soon, or we will go under.

Right now, I'm thinking going under.

[harun]

18. My guess is when some Repukes started saying they supported Nationalization

that Obama might have thought they were going to use it as a political trap.

If I were Obama I would tell the Repukes that Nationalization is the way to go but Dem's won't bring the bill. That if they feel the same way, bring the bill, introduce it from a Repuke, Repuke sponsors and get it done. If not... trap.

[bluestateguy]

2. He will. He just won't call it that.

I just can't say that I know when it would happen. But I am convinced that it will.

[EmilyAnne]

5. So they would remain nominally private? Would that be political or practical? Or both?

Does this have to do with selling the "toxic assets?"

[vaberella]

17. Both...

nope not about the toxic wastes. Government is extending it self politically in a nation that has a good amount of people who don't want big government. He probably just doesn't want to "scare" the Repubs into hysteria with his plan. He could just buy it and take the heat, but we don't like the banks very much right now. Buying it or not is toxic no matter what...and what caused the global economic meltdown is toxic assets. It's debt sold as stock.

[AllentownJake]

3. Its not something you announce than do

Its something you do than announce. Someone posted that on here a week ago.

Announcing it during the week and than doing it will send the market into a crash. If you do it on a Friday and have time to detail your plan over the weekend you have time to prevent a total melt down.

[EmilyAnne]

6. Interesting. That makes a lot of sense. Still, why hasn't he done it yet? Is there something to

wait on before doing it?

[AllentownJake]

7. I'm guessing the plan is only to nationalize the losers

When Citi's stock falls low enough share holders can't bitch they are losing their investment.

Same thing with GM, would not be surprised to see a Government take over there.

[EmilyAnne]

8. What happens to stockholder shares in a nationalization? Are the owners reimbursed?

I am so clueless about this.

[AllentownJake]

9. Nope they get NADA

Zippo, nothing. Its why we still have an embargo against Cuba...alot of US companies lost big money when Cuba nationalized everything. Its also why Hugo Chavez is so hated. He did that to the oil interest.

Which is why I believe with GM and Citi once there is no value in the stock you can tell the share holders to go fuck themselves.

[Skinner]

15. I don't think that is correct.

Cuba and Venezuela are very different from the United States. If we (the US Government) were to nationalize our banks, we would almost certainly pay for the privilege.

Now, there is no guarantee that the stockholders would get very much money -- after all, bank stocks are way, way down right now. But it is highly unlikely that the government would just take their assets for nothing. Generally, here in the US, we call that "stealing."

(In fact, I think it might be unconstitutional under the "takings" clause of the Constitution to nationalize any company without compensation. Any constitutional experts on DU who could weigh in?)

[AllentownJake]

16. If they go into recievership

I.E. their stock becomes worthless because a share holder is the last in line for paying debts from the existing assets, the US government would broker a deal with the debtors to keep payments on debt while keeping the companies afloat through reorganization.


The government won't nationilize these companies till they go broke.

[Milo_Bloom]

20. They could "nationalize" via a temporary takeover.

Once they own 51%, they have "nationalized" the bank, but not necessarily divest the previous shareholders.

"nationalize" it, get the bank backs on its feet and then sell the stock back at a profit and allow the bank to return to the private sector, with the government making money on the "investment".

[bluestateguy]

11. Agreed

If they suggest that they are mulling the idea then the market will tank for weeks.

You have to do it on a Friday night(preferably before a holiday weekend) and as cleanly and quietly as possible.

[AllentownJake]

12. It should also involve the house arrest of the E suite

till the books are checked out, but I don't think we have that much balls.

[EmilyAnne]

13. I feel so ignorant in threads about the economy. E suite? Are you referring to executives? So

they can't react to the nationalization until the company assets are accounted for?

E suite? Hmmm....

[AllentownJake]

14. Yep

The Senior VPs and CEO...the people who made decisions. Wouldn't want them to be doing any deleting or paper shredding.

[Teaser]

19. he will

no other option. It will happen. only question is when.

[marshall]

21. He can't do everything overnight.

Give him time.

[grantcart]

22. When the FDIC takes over the bank they wipe out share holder equity

and the bonds the bank issued and transfer the deposits and the loans.

If the bank is nationalized then the shareholder equity is wiped out but the government then undertakes to pay for the bonds that the bank has issued.

How is this good. It is a massive transfer of wealth from the taxpayer to bank bondholders and that is why people like Senator Graham and other far right wingers are in favor of it.


Having the FDIC take over the bank and wipe out both shareholder and bond holder equity is a much better and more 'socialized' method than the government coming in promising to pay all of the banks debts, including the rich bond holders.


BTW, when people talk about Sweden 'nationalizing' the banks, they only did so on a temporary basis and then re-privatized the banks - excactly the same thing the FDIC does when it takes over the bank. Today all of the banks in Sweden are back in private hands, so the term 'nationalizing the banks' is a complete misuse of the term. When they are talking about 'nationalizing' the banks they are simply talking about taking temporary ownership - this is not nationalizing an industry.

[garryowenII]

23. No, No, No, No, No

Let me explain. If you nationalize any bank it will become the safest bank around because it is backed by the Fed in its entirety.

Currently your deposits are guaranteed by the FDIC to the amount of $125,000.

A nationalized bank would be fully insured (it is now a national bank). Once that is done investors will logically move their holdings into the national bank causing a run on the non-nationalized banking system.

Once a run occurs on the banks look-out depression here we come. The cause of the 1929 depression was an unexpected run on the banks. That is exactly the scenario the President would create if and when the banks are nationalized.

[harun]

24. Easily avoided, you simply don't allow holdings to be moved in to the bank.

[garryowenII]

26. That is the purpose of a bank. It wants people to deposit...

money so it in turn can lend it back out in order to collect interest that it can then lend out or invest.

[FrenchieCat]

25. I've been an accountant for 25 years.....

But yet, I won't claim to "know" exactly the solution to this nightmare.

What I will say is that I trust Barack Obama much more than the armchair economists here,
who would want to believe that they know better. In fact, even the economists out in the real
world don't truly know what is the best remedy beyond their educated guess.

If Barack Obama can't even get last year's spending bill passed by the
Democratic majority in the senate, I'm a bit amazed that he is expected to do what may be
politically impossible.

When one has Greenspan cheerleadering the nationalization of banks, one has to ask
if it really is the best thing to be done.

Strange how folks believe to have the answers, when they really don't have a clue as to whether
they really do or not.