The Treasury department is spending $250 billion to buy stock in nine of our largest banks, thus giving them capital to lend. From The Washington Post:
The U.S. government is dramatically escalating its response to the financial crisis by planning to invest $250 billion in the country’s banks, forcing nine of the largest to accept a Treasury stake in what amounts to a partial nationalization. . . .
In pressing the bank executives to accept partial government ownership, Paulson’s message was clear: Though officially the program was voluntary, the banks had little choice in the matter. In exchange for giving the Treasury minority stakes, the nine firms would jointly receive an investment worth $125 billion. The government would make another $125 billion available for the next 30 days to thousands of other banks and thrifts across the country.
From
BusinessWeek:
The substantial sums involved make clear that Uncle Sam could be on the way to owning a vast chunk of the U.S. banking sector. A government investment of $250 billion amounts to perhaps 25% to 30% of the market capitalization for publicly traded banks, says Rajiv Sobti, chief investment officer at Nomura Global Alpha, a unit of Nomura Asset Management USA. Hundreds of banks could eventually receive such equity funding.
Yesterday the stock market soared 936 points, as all of this bailing out started to encourage investors. If all of this bailing out “works” to improve the economy, would that justify the new statist/corporatist policies? Does pragmatism trump every other principle, and so is pragmatism our only ideology?
Another question: We have been having some fierce political discussion on this blog. On the posts about the economy, however, we have had very few comments praising the Bush/Congress bailout scheme. Both Republicans and Democrats, conservatives and liberals, seem to dislike it, even as our elected officials and our presidential candidates–Republicans and Democrats, conservatives and liberals–voted for it. I have posted my worries about whether Barack Obama is a socialist, but I am even more worried to see that the current Republican administration really IS socialist (nationalizing banks?). So, how about it, liberals and conservatives on this blog. Is this something we can agree on, though perhaps for different reasons (e.g., violating free enterprise economics vs. giving money to the fatcat corporations), opposing the Bush/Congress bailout? Is there anyone out there who can defend this on the basis of principle, rather than pragmatism?
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