Nationalization Makes Strange Bedfellows

Oh boy, do I hate writing this post.

The AFL-CIO Executive Council is supposed to announce tomorrow its support for nationalizing problem banks. The NYT has a report:

The A.F.L.-C.I.O.’s executive council will call on the Obama administration on Wednesday to speed the nationalization of problem banks to stimulate lending and lift the sagging economy.

The labor federation, a lobbying powerhouse that represents 10 million workers, will thus become one of the first groups — and certainly the most powerful — to call for moving more aggressively on nationalization, both to counter Republican and business cries against it and to press the Obama administration not to vacillate over such a move.

A.F.L.-C.I.O. officials asserted that the administration’s practice of giving billions of dollars in dribs and drabs to distressed banks had failed to restore their solvency, leaving them as zombie banks that largely refrain from lending, thereby contributing to the economy’s decline. ...

The labor leaders also asserted that the Obama administration, like the Bush administration, had failed to obtain fair value for the tens of billions it had invested in distressed banks.

So, if you’ve been pushing for this outcome you have a new bedfellow. Never has the old saying, “Be careful what you wish for” been more apropos. You have a powerful ally, but be very careful of their long-term goals.

The union asserts that it views the move as a necessary short-term strategy, not a permanent solution.

A.F.L.-C.I.O. leaders said they did not favor long-term nationalization of banks, but rather temporary trusteeships in which the government would take a controlling stake in a bank, clean up its balance sheet, then spin it off.

“The result should be banks that can either be turned over to bondholders in exchange for bondholder concessions or sold back into the public markets,” the executive council’s draft said.

And here is why I hate writing this. John J. Sweeney, the President of the union, is an avowed socialist. He makes no bones about it and it would be irrational to assume that his lieutenants harbor much different philosophies.

I know, I sound like some 1950’s McCarthyite. But facts are facts. Mr. Sweeney, whom I actually think quite highly of, espouses a philosophy that contends that state control of key sectors of an economy is a beneficial outcome. To take the statement that the union views nationalization as a temporary solution at face value is to believe water flows uphill.

At least the battle is being joined quickly.

Comments

[raytayzmd:]

...I read that Obama's about to announce the new symbol for the rescue plan will be a condom since a condom allows for inflation, destroys the next generation, protects a bunch of pricks, and gives you a sense of security while you're getting screwed.

Mar 04 11:33 AM

[the_feds_co...:]

Its time to make our government work for us .STO P POLLUTING OUR MARKETS WITH SOCIALISM!!!
If president obama wants to unify the country he Needs to move toward the political center.The best way to do this in the financial markets is :
CUT THE CAPITAL GAINS TAX TO 0 ON ALL BANK AND PROBLEM FINACIAL STOCKS!!
i VOTED FPR U PRESIDENT OBAMA PLEASE DONT DISAPPOINT ME!

Mar 04 11:53 AM

[Moon Kil Woong:]

At least he is honest in regards to his political bent.

To nationalize the financial sector allows government intervention in any industry it wants and enables it to sway any industry in favor of whatever company it wants to champion. Long term government involvement in private sector companies distort the fabric of the free market. Fannie Mae and Freddie Mac are a prime example of how they can lead to terrible imbalances with staggering costs to the economy and the taxpayer.

Mar 04 12:36 PM

[User 267964:]

That was your first mistake


On Mar 04 11:53 AM the_feds_corrupt wrote:

> Its time to make our government work for us .STO P POLLUTING OUR
> MARKETS WITH SOCIALISM!!!
> If president obama wants to unify the country he Needs to move toward
> the political center.The best way to do this in the financial markets
> is :
> CUT THE CAPITAL GAINS TAX TO 0 ON ALL BANK AND PROBLEM FINACIAL STOCKS!!
>
> i VOTED FPR U PRESIDENT OBAMA PLEASE DONT DISAPPOINT ME!

Mar 04 12:40 PM

[Paul H. M.:]

Obama is the most intelligent man to hold the white house for a very long time. If you can trust anybody, Obama is the man.

Remember, Bush is gone? We now have a very smart and well-educated man on top. He'll do whatever needs to be done to right this ship.

But it won't happen overnight; but please, have some faith! We don't have a retarded president anymore. That fact alone will increase investor confidence and improve our economy in the next couple of years.

Think about it, we had a mentally challenged rich kid in charge for the last eight years. Can we really be so surprised that our economy collapsed?

And the GOP nominated another mentally challenged, and uneducated man in 2008. Thank god enough people wanted an educated leader, which allowed Obama, our savior, to win.

Mar 04 01:00 PM

[Nick Waddell:]

These are extraordinary circumstances. Is a degree of nationalization not preferable to injecting money into zombie banks? In a perfect world we wouldn't have to choose. But, increasingly, the world is pretty far from perfect.

Mar 04 01:04 PM

[Speedspirit:]

This problem-reaction-solut... policy making will lead to nowhere but fast. The financial sector has grown to large in relation to the real economy. 40% of the S&P profits compared to 15% in the 1980's. If the common man knows what kind of disaster is before us then what do you suppose keeps the Govt from understanding? They do know exactly what they are doing! They are just attempting to concentrate wealth to the wealthiest and along with it control. But what they dont count on is the American Spirit and that Good always triumph over Evil. So the ride is going to suck but in the end we will be rid of most of them.

Mar 04 01:06 PM

[user344210:]

People need to distinguish "smart" from "says stuff I like to hear".

On Mar 04 01:00 PM Paul H. M. wrote:

> Obama is the most intelligent man to hold the white house for a very
> long time. If you can trust anybody, Obama is the man.
>
> Remember, Bush is gone? We now have a very smart and well-educated
> man on top. He'll do whatever needs to be done to right this ship.
>
>
> But it won't happen overnight; but please, have some faith! We don't
> have a retarded president anymore. That fact alone will increase
> investor confidence and improve our economy in the next couple of
> years.
>
> Think about it, we had a mentally challenged rich kid in charge for
> the last eight years. Can we really be so surprised that our economy
> collapsed?
>
> And the GOP nominated another mentally challenged, and uneducated
> man in 2008. Thank god enough people wanted an educated leader, which
> allowed Obama, our savior, to win.

Mar 04 01:28 PM

[Tesa:]

I find it pretty amazing when grown adults can not take responsibility and distort factual assessments of their own banking system and resort to McCarthyism knowingly. US banking system in its entirety has/had gone bankrupt and without government intervention US banking system and government would have collapsed.

Many have had so much blind faith in so called capitalism that had ignored major signs of massive fraud encapsulating their banking system and the pay back has been the current status.

Even Mr. McCarthy would have been begging to nationalize these banks himself being an overzealous nationalist claiming that communist would like to buy American banks to control it or something along those lines. Fanny and Freddie were government owned during his life time after all.

Mar 04 01:46 PM

[Socialism c...:]

Why do you act like there are only 2 choices??? LET THEM FAIL.


On Mar 04 01:04 PM Nick Waddell wrote:

> These are extraordinary circumstances. Is a degree of nationalization
> not preferable to injecting money into zombie banks? In a perfect
> world we wouldn't have to choose. But, increasingly, the world is
> pretty far from perfect.

Mar 04 02:09 PM

[Socialism c...:]

People need to read Friedrich Hayek's classic "The Road to Serfdom" post-haste!!! Classic explanation of how government interference always leads to government control, and eventually, communism. He has another notable volume that is a collection of essays and letters written in the years 1931-32, striving with John Maynard Keynes!

Mar 04 02:13 PM

[Tesa:]

If they did let them fail, then your high speed internet would have been disconnected by now because the banks in USA were insolvent. They had more debt than capital and their insurer was also insolvent.


On Mar 04 02:09 PM "Socialism cannot compete! " with a ranting ID "wrote:->

> Why do you act like there are only 2 choices??? LET THEM FAIL.<br/>

Mar 04 02:20 PM

[James Wilson:]

Yeah the Corporate controlled markets work so much better with Oil refinerys cutting back production to keep prices high and Americans under their thumb.

What would the price of gas fall to in a FREE MARKET with refinerys actually making gas 24/7 ? $0.10 cents a gallon ?


On Mar 04 11:53 AM the_feds_corrupt wrote:

> Its time to make our government work for us .STO P POLLUTING OUR
> MARKETS WITH SOCIALISM!!!
> If president obama wants to unify the country he Needs to move toward
> the political center.The best way to do this in the financial markets
> is :
> CUT THE CAPITAL GAINS TAX TO 0 ON ALL BANK AND PROBLEM FINACIAL STOCKS!!
>
> i VOTED FPR U PRESIDENT OBAMA PLEASE DONT DISAPPOINT ME!

Mar 04 02:24 PM

[wisurvey:]

Bank or AIG failure at this point is not an option. The govt has no choice but to continue to prop them up with our money until such time that the CDOs and CDSs expire. Short of refinancing every mortgage written in the past 5 years; those are the real only two options. What you fail to understand is that; yes the banks and some insurance are insolvent; however to put those CDO and CDS on the fed balance sheet will add somewhere around 15+ trillion to our deficit. Also it takes the foreigners bankrupt (Japan, China, England [why do you think Brown is here], etc) On that occurrence our govt no longer is functional at any capacity because the majority Americans simply haven't saved any money whatsoever and cannot afford to go more than 2 weeks without a paycheck. The seriousness and ugliness of this situation is not lost on me!!! Seems the path chosen is to borrow from our foreign comrades, prop up this mess, and wait the 5 or so years for the CDOs and CDSs to expire. Hang on.....the ride is just starting.

Mar 04 04:36 PM

[Shabba:]

Can anyone explain why B of A should be nationalized after making a profit in 2008? It was a small one but they did make a profit. They made a profit in all quarters except the fourth too. If I remember right they lost 67 cents a share. It doesn't seem like banking conditions could be any worse than what happened in 2008, especially for a whole year, so I got assume that things will get better.

I'm just assuming that nationalization has to do with a company's inability to honor its committments, and the "too big to fail" idea.

Mar 04 04:40 PM