Socialism Bush Style: Feds To Take Stakes In US Banks

We are all Swedes now:

Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials. Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones.

All kidding aside, this is a good approach for the Wall Street crisis (though it does not address the homeowner/mortgage crisis that underlies the economic problems). Paul Krugman writes:

A tentative cheer: Paulson may have been dragged kicking and screaming into doing the right thing to rescue the financial system . . . Let’s give thanks to Chris Dodd, who insisted on the provision that makes this possible — and to Gordon Brown, for showing the way.

That's fine but Krugman seems unwilling to look at the homeowner/mortgage crisis, or rather, he seems unwilling to embrace a plan to help homeowners - i.e. HOLC. He has not written against it but seems not to have a written a word about how to address the homeowner crisis.

The problem seems systemic on the progressive side. I frankly am baffled by it. Because dealing with the Wall Street crisis is important, but what about Main Street? That matters just as much or more. The Democrats and their progressive allies are strangely silent on the homeowner crisis. Not bold progressivism if you ask me.

By Big Tent Democrat, speaking for me only

< Late Night: Poor, Poor Pitiful Me | Helping Homeowners For The Common Good >
  • The Online Magazine with Liberal coverage of crime-related political and injustice news

  • Contribute To TalkLeft

  • Display: Sort:
    Bold Progressivism! (5.00 / 1) (#3)
    by mmc9431 on Thu Oct 09, 2008 at 08:10:23 AM EST
    We have the wrong candidate and the wrong party leaders to expect anything bold. They're all very cautious politicians.

    As long as the mortgage crisis persists, all these other effort are just patches on a flat tire.

    Socialism? No. This is fascism. (5.00 / 1) (#5)
    by wurman on Thu Oct 09, 2008 at 08:31:54 AM EST
    The large corporations working hand-in-glove with national government agencies is elementary fascism.  We are observing a rightwing, totalitarian government funding the monetary cartels (an oligopoly) that now "run" the USA economy &, very shortly, the world economy.

    Definitions matter.  Wikipedia

    Various scholars attribute different characteristics to fascism, but the following elements are usually seen as its integral parts: nationalism (including national socialism, national syndicalism, along with collectivism, mysticism and populism based on the nationalist values); corporatism (including class collaboration, economic planning, mixed economy, and third way); totalitarianism (including dictatorship, holism, major social interventionism, and statism); and militarism.[16][17] Fascism opposes communism, conservatism, liberalism, and international socialism.
     [My bold emphasis]

    Government welfare for banks in a nation where 47 million humans don't have health care is certainly not "socialism."

    The insanity of this boggles!

    My thoughts exactly.... (none / 0) (#8)
    by kdog on Thu Oct 09, 2008 at 09:25:31 AM EST
    Socialism can easily turn to fascism...especially in the general pro-corporate anti-individual climate we have here in the USA.  I'm always b*tching about the sorry state of liberty here and abroad...the economic "crisis" is leaving liberty in an even sorrier state.  They've got us all scared sh*tless, just like with the war on terror, and we're surrendering our liberty without a shot.

    Banks don't need our money...we need our money....f*ck the banks if they can't make money despite being given every advantage under the sun.


    Agreed, it it was socialism, I'd say (none / 0) (#13)
    by eric on Thu Oct 09, 2008 at 10:37:22 AM EST
    bring on the socialism! But it isn't socialism. It is government sponsoring the corporate.

    Let's have some real socialism. We won't get it, of course, because guaranteeing minimum economic equality, education, and health care to an average citizen is scary. Free money for banks isn't.


    Look at some those who voted against the bailout (5.00 / 1) (#7)
    by MikeDitto on Thu Oct 09, 2008 at 08:51:53 AM EST
    Mark Udall (my boss), for instance, gives four reasons for why he opposed the bailout bills:

    1. It does nothing to help struggling homeowners stay in their homes
    2. Very little accountability or oversight
    3. Does not, contrary to claims, prevent billions of dollars being spent on golden parachutes (or trips to 4-star spa-resorts)
    4. Doesn't do enough to ensure taxpayers get a return on their investment

    Most Democrats supported the bill even though, as the boss said, "the exceptions in this bill swallow the rule.  In short, the bill doesn't do what it claims to do." Of course those who supported it are going to cover their behinds and not talk about what the bill doesn't do.

    So, yes, most Democrats are not talking about addressing the homeowner's side of this crisis, but some are. And they deserve attention...especially since some of them are in very tight races (like the boss).

    I was just reading about this in the NYTimes. (none / 0) (#1)
    by Angel on Thu Oct 09, 2008 at 07:56:33 AM EST
    Also, Robert Reich's op-ed today is a worthwhile read. He has a good way of explaining things....  

    Well, that's a welcome development, (none / 0) (#2)
    by scribe on Thu Oct 09, 2008 at 08:00:33 AM EST
    if only because I really like Swedes.  And, a lot of them are hot, too....

    finally (none / 0) (#4)
    by Turkana on Thu Oct 09, 2008 at 08:22:30 AM EST
    a move i can respect. maybe brown doing it seemed a green light, for bush. now, about holc...

    Why not HOLC (none / 0) (#6)
    by Lahdee on Thu Oct 09, 2008 at 08:40:01 AM EST
    You'd think a little post partisan leadership could win the day for Main Street.

    directly injecting needed (none / 0) (#9)
    by cpinva on Thu Oct 09, 2008 at 10:03:02 AM EST
    cash into banks, and taking an equity stake in those banks are not, by definition, mutually inclusive propositions, and i'd be shocked if dr. krugman (who knows better) were to agree they were.

    the fed can do the former by virtue of low discount rate loans (they just reduced the rate by 1/2 point), the latter isn't required. further, they can shore up the credit market by being the guarantor of last resort. again, they needn't take an equity interest to accomplish this.

    i suspect the reason HOLC isn't discussed is that, the more everyone looks at it, the more distasteful it becomes politically. it would be seen (rightly or wrongly) as rewarding people for being greedy & stupid.

    not exactly what you want as your campaign slogan.

    Good point (none / 0) (#11)
    by Big Tent Democrat on Thu Oct 09, 2008 at 10:28:46 AM EST
    Not on HOLC though (none / 0) (#12)
    by Big Tent Democrat on Thu Oct 09, 2008 at 10:29:17 AM EST
    HOLC-LIKE SOLUTIONS (none / 0) (#10)
    by santarita on Thu Oct 09, 2008 at 10:15:34 AM EST
    In yesterday's press conference Paulson talked about purchasing mortgages and renegotiating terms.  

    Paulson is facing a number of fundamental problems.  One of them is the downward spiral of real estate prices and the upward spiral of foreclosures.  Another problem is that banks are not fulfilling one of their fundamental functions - lending to one another and lending to business.  The two problems are interrelated.  

    One way to attack both problems is to create HOLC.  But Paulson could essentially do the same thing without creating another layer of bureaucracy by taking equity stakes in certain banks and then mandating that those banks act as clearinghouses for purchasing troubled mortgages and renegotiating them.  Perhaps this is what Paulson has in mind.  

    And I'm not sure that Krugman hasn't talked about HOLC-like solutions.  I'll have to go back and look.  But I do know that he has advocated direct injections of capital into banks and getting equity interests in return.  To me it goes almost without saying that any such equity interest carries with it the promise that mortgage loans in that bank or under its control will be renegotiated.

    Krugman, Baker, and many others think housing (none / 0) (#14)
    by jerry on Thu Oct 09, 2008 at 11:11:28 AM EST
    is still way too expensive compared to long term trends.

    I believe, I really don't know, that they are against price stabilizations at this still highly inflated level.  I kind of think they think price stabilizations can't possibly work at this level, it would be throwing good money after bad.

    Anyway, that's how I understand what Dean Baker, Paul Krugman, Calculated Risk, and others have been saying.

    The long term price of housing should approach rental prices.

    And speaking of rental prices.... (none / 0) (#15)
    by oldpro on Thu Oct 09, 2008 at 11:25:57 AM EST
    ...they've been skyrocketing in Seattle.  

    And some of the unsold homes on the market have been turned into rentals, even though the rent doesn't quite cover the mortgage for the owner/builder.

    One idea for keeping folks in the homes who might otherwise lose them is to let them rent their own homes through the negotiation/revaluing process.  Makes sense to me on many levels...not disrupting peoples lives unnecessarily and keeping properties occupied to preclude vandalism and decay of the property are just two.


    What Democratic party (none / 0) (#16)
    by koshembos on Thu Oct 09, 2008 at 03:07:37 PM EST
    The Democratic party of FDR, JFK, LBJ and even Bill Clinton doesn't exist anymore. The new faux-Democratic party seems to spit on the floor whenever Bill is mentioned. It's not for the poor, not for us, it's for them - the members of congress who see themselves as the management of of corporation. Obama is the next CEO of the Democratic party.

    The Democratic company is disinterested in the "bumps" that cannot pay their mortgages. HOLC? They don't need it.