Nationalize the Banks, or Don't -- But Flirtation Just Scares the Depositors
Senator Chris Dodd may have just pulled a Hillary Clinton. . .
Like Clinton who just sent the media into a tizzy by referring to North Korea's leadership succession struggles and thus prompting a mad dash to understand whether she was now looking beyond Kim Jong Il or encouraging a coup, Senator Dodd has caused ripple effects with his comments about possibly nationalizing Citibank and Bank of America.
This from a Bloomberg report on Dodd's interview with Al Hunt:
Christopher Dodd said it may be necessary to nationalize some banks for a short time as Citigroup Inc. and Bank of America Corp. tumbled today on concern the U.S. may take over both banks."I don't welcome that at all, but I could see how it's possible it may happen," Dodd said in an interview on Bloomberg Television's "Political Capital with Al Hunt" to be broadcast later today. "I'm concerned that we may end up having to do that, at least for a short time."
I just withdrew some cash from Citibank and plopped it into my credit union account. I'm under the FDIC insurance limits, but still, do I really want a lot of assets caught up in a bank about to be nationalized?
No. And I should have withdrawn the money anyway when I saw that Robert Rubin had received more than $100 million for "consulting."
As I write this, Citibank is at $1.68 a share, down 30%.
Bank of America is at $2.53, down 35%.
If Hillary Clinton wants a coup in North Korea or hopes to derail the Six Party Talks, then her comments were on target.
But if Chris Dodd, an otherwise great guy, wants to help stabilize markets and build confidence in whatever it is the administration is trying to do, he should either just nationalize the banks -- or not.
But don't publicly flirt with the idea of doing so.
-- Steve Clemons publishes the popular political blog, The Washington Note
Both banks will be nationalized....and soon, within 90 days. The word 'nationalization' is being used to get people to slowly accept the idea.
February 20, 2009 2:18 PM | Reply | Permalink
Let's see who else is talking about nationalization.
Added to the list of Dodd, Graham, Greenspan you can also add Senator Schumer. After first saying he was against it, in an Huffington Post interview Schumer now entertains the idea. Of course they will call it something else. Schumer likes the word 'detoxification'.
February 20, 2009 2:48 PM | Reply | Permalink
Dodd, and especially Schumer, along with Phil Gramm and the entire Republican party are the bag men for these shysters; lets see how the moneygrubbers running these banks fare if they do get 'nationalized'.
February 20, 2009 2:52 PM | Reply | Permalink
It's unfortunate that people use words loosely in such situations. There are important differences here:
Nationalization
Intervention
Chapter 11
Liquidation
But 'nationalization' is the current media "term of art" even though it's pretty clear that it is a misnomer. I'm pretty sure that Invervention is what is being looked at, not Nationalization.
BTW, not all ripple effects are unintentional.
February 20, 2009 8:41 PM | Reply | Permalink
It's not called a bailout, it's an economic rescue plan...it's not called a (Wall Street) bonus, it's called my base salary + commission... it's not called nationalization, it's called receivership.
February 21, 2009 6:40 PM | Reply | Permalink
pol,
unfortunately "receivership" as a word doesn't sell the way Nationalization does for the Republicans and the slothful news media.
February 22, 2009 1:42 PM | Reply | Permalink
If we were in the position the bankers and politicians were in for the last decade, would any of us be so willing to give the stench of power up? Human nature. We fear what we don't understand and change in mega doses is anathema to our senses.
Roubini and a few others saw the freight train coming but D.C. and Wall Street looked the other way until the inevitable was upon us. Dr. Nancy Kubler-Ross wrote the book " On Death And Dying", and outlined the stages we as humans face when confronted with our own end. We are now leaving the depression stage and acceptance is upon us.
Roubini saw what we couldn't imagine. That being that the banks that make up the composition of the Federal Reserve, were bloated, over extended and headed for insolvency. What is a sovereign government to do? That is where we are at this moment in time and the die has been cast.
Personally I don't fear nationalization whether temporary or permanent and hopefully the latter because this was the gift that the founders gave us. A money system that was controlled by we the people not a run for profit system that could easily be lead astray by those who would take advantage all in the name of profit for the few at the top.
Those complaining the loudest like the talking heads on CNBC fear for their friends in the hallowed canyons of Wall Street. No more golden parachutes, private jets, spa junkets or hundreds of millions in bonuses paid for a job well done. Now they will have to answer to a higher authority. We the American people.
February 22, 2009 10:22 PM | Reply | Permalink
M F Mary,
excellent analysis. This is a replay of the ENRON debacle. All those who could have kept this from happening didn't because they were all making too much money. ENRON was helped into oblivion by the accountants, the auditors at Arthur Anderson, this time around its the bond rating services like Moodys.
February 23, 2009 1:09 PM | Reply | Permalink
I absolutely agree. The market and the American people need a clear message, either we will temporarily nationalize them or not. This constant ambiguity and flirtation doesn't do anyone any good.
Either we do the dirty deed and deal with the political and economic fallout or we continue on a path that will more than likely result in us doing it anyway down the road.
Everyday the administration and Congress waste on this is another day the economic goes on unsure of what the next option will be, and in an economic crisis that is not what the country or markets need.
February 23, 2009 8:17 PM | Reply | Permalink