Looks like it is time to add Comrade back to my name again:
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.
The Treasury plan was still preliminary and it was unclear how the process would work, but it appeared that it would be voluntary for banks.
The proposal resembles one announced on Wednesday in Britain. Under that plan, the British government would offer banks like the Royal Bank of Scotland, Barclays and HSBC Holdings up to $87 billion to shore up their capital in exchange for preference shares. It also would provide a guarantee of about $430 billion to help banks refinance debt.
Now before I ask my question, let me state right now that I am working from a position of profound ignorance- imagine Sarah Palin discussing evolution and irreducible complexity. I have no idea how this plan will be implemented, how it will be managed, what will happen, etc.
Now, the question- if we do, in a sense, nationalize the banking system, what impact will this have on privacy issues? I can imagine nothing this administration and Cheney, not to mention the drug warriors, would want more than the ability to have unfettered access to depositor information.
And before you laugh and call me paranoid, remember what has happened the past few years.
*** Update ***
From the comments:
I think using the term “nationalizing” is dangerous here precisely because it leaves the impression that the government will be running the banks. Really, it’s more like the banks got a new round of investors who just happened to be the taxpayers. Now those new investors have as much right to look at the books as any other investor (or, at least they should have that right), but that does not mean the government will manage the day-to-day operations of the bank or be able, in John’s fear, look at depositors private information.
over_educated
Actually, from what I understand, taking an equity share in banks is actually a MUCH better deal for the taxpayer and will force accountability/transparency on institutions that desperately need it.
CR has a few posts on this I believe.
Rick Taylor
I think you meant irreducible.
Michael Demmons
D. Mason
The only funny part is that You think they don’t already have it.
John Cole
@Rick Taylor: yes. Typo. Funny I had to spell it right in google to find that video, then mangled it in the post.
Jasper
Remember way back a few months ago when we feared the influence that sovereign wealth funds might exert on our banks if their investments were allowed to grow too large?
With republicans at the helm, I’d almost welcome the comparatively benign risks of having banks owned by the Saudis or the Chinese.
Punchy
Pretty sure somebody already linked to it, but heard on the news this morn, that despite their plea for a gajillion ducats in welfare aid, AIG execs are planning some ridiculously expensive junket somewheres.
Low on the specifics, but this just enraged me this morning. How those fuckers can pull the fucking inside-out-pockets maneuver to Congress, then turn around and book some boffo bender in the Bahamas is fucking unreal.
Anyone got a link?
liberal
over_educated wrote,
Agreed. Moreover, it appears that most economists think that direct capital injection is very likely to be much more effective in dealing with the crisis than the backdoor method of buying and overpaying for toxic waste from banks.
It’s too late to avoid nationalization or the equivalent. It’s the only solution at this point. JC’s concerns could be mitigated by statute—I’d favor making breaking privacy rules a felony, punishable by a minimum of five years in the slammer.
cleek
if you have nothing to hide, you have nothing to fear, Comrade. be a good citizen and everything will be fine. do not fear, for fear reduces your productivity and causes you to dwell on things that are not your concern.
have a nice day
Adrienne
They already have it. All they have to do is "request" it. Have you not read the Cliff’s Notes of the Patriot Act.
Isn’t this how they caught Spitzer "palling around" (wink, wink) with that high priced ho?
NonyNony
As others mention above, the whole "taxpayers should have equity in the banks if they’re going to give them money" argument was made over the last few weeks very cogently by a number of economists, including Krugman, Reich, and I think Roubini. They use the name "Swedish Plan" sometimes when they talk about it, and it’s attractive because it has worked in the past. (Unlike Paulson’s plan that no one quite understood – including, I think, Paulson).
As far as the privacy issue around banks – well, you actually don’t have that much privacy around your bank account as it stands, at least from the government. There are already a number of anti-terrorism and organized crime measures in place that kick in when you start to move sums of money around that the government considers "large" – as I recall, that was how Eliot Spitzer got caught with his little escort problem. And if the IRS is auditing you, it is trivially easy for them to get a judge to get them permission to freeze your accounts until you deal with them.
So yeah, it’s a concern, but given the levels of infringement on our privacy the government was able to get away with using the telcos that they didn’t have an ownership stake in anyway, I don’t think an ownership stake will make things any different if the government decided to push it. In fact, with an ownership stake there will probably be people watchdogging the whole operation – easier to keep an eye on things when you KNOW that the government is meddling in them.
The best way to make sure that this stuff doesn’t happen is to keep a Democrat in the White House. Because Republicans only get concerned about powers to push against privacy when they think someone other than they may be using them. Democrats for some stupid reason just like to directly hand their political enemies the ability to wiretap and blackmail them. One reason why the donkeys are kind of dumb. (Yet still better than the alternative. Sigh.)
cleek
exactly. one mechanism is National Security Letters – the Feds can get any records they like, without oversight, without probable cause, and they come with a built-in gag order so nobody can even talk about the fact that they’ve been ordered to give up your info.
this shit has been around for 30 years, and USA PATRIOT only made it worse.
and this is precisely why the FISA debate seemed silly to me – we lost the privacy battle decades ago.
nicethugbert
They would privatize the operation thereby transfering all that information into their buddies hands.
I say, no fuking bailout. The small banks have doubled their business ever since the large bank monopoly took a vacation. Car dealers are turning to small banks. All that is required is time for the free market to grow the small banks.
The small banks invest in us, in the things we buy and use, homes, cars, small businesses, etc., not in To Big To Fail To Expensive to Live With.
It’s just paper and the feds will print lots of it anyway so let the big banks miss out and go to hell.
kommrade jakevich
Bwahahaha! Stop! Stop! You’re killing me! Confidence in the … Whoo! Treasury Department … Haw haw haw! Oh God, can’t breathe.
Bwahahaha! Stop! Stop! You’re killing me! Privacy … Whoo! This Administration … Haw haw haw! Oh God, can’t breathe.
Seriously, banks already tag a number of transactions as part of The War Against Drugs n’ Terra. I’d be more worried about what will happen to the cash when a bunch of fumble fingered Regent’s U Grads start whapping the computers with their Bibles.
Support your local banks, folks. They’re less likely to accidentally close out your account or transfer your funds into deep space. And you’ll know where the president lives if something does go wrong.
Rick Taylor
I sympathize. I really do know the difference between "loose" and "lose" and "its" and "it’s", but that doesn’t mean I always get them right when I write a post.
Dennis - SGMM
"Privacy?" That’s soooooo pre-911.
bartkid
>to try to restore confidence in the financial system
Just remember, the con in con men stands for confidence.
FearItself
Comrade Cole,
In New America, bank writes checks on you!
Seriously, federal ownership of equity wouldn’t likely have a privacy effect because the government would just be a shareholder. Even the largest shareholders in banks don’t (legally) have access to depositor information.
Not that it matters, because NonyNony and others above nailed it; the government’s nose is already so far up our collective financial ass that they’re sniffing our tonsils, so whether they have a financial stake in the banks or not is pretty much irrelevant.
Chris Andersen
I think using the term "nationalizing" is dangerous here precisely because it leaves the impression that the government will be running the banks. Really, it’s more like the banks got a new round of investors who just happened to be the taxpayers. Now those new investors have as much right to look at the books as any other investor (or, at least they should have that right), but that does not mean the government will manage the day-to-day operations of the bank or be able, in John’s fear, look at depositors private information.
Comrade Dread
Well, worse case scenario, Comrade John, it’ll dispense the formality of the DHS sending out letters to the bank and remove the dollar limits on transactions you make before the banks are required to tell the DHS about you.
As it stands, most of our ‘privacy’ is based on the ‘good faith’ (I know, try not to laugh) of government officials.
Graeme
They can and will look at your banking records, comrade Cole.
thomas
Graeme is right –if anyone thinks their financial transactions over the last six or seven years have been in the least bit confidential, I have some really safe mortgage-backed securities to sell you.
Brachiator
Privacy issues might be the least of our problems if quasi-nationalization doesn’t work.
jcricket
ZOMG! Socialism! Eeek! Run!
The worst part about this current crisis is that the smart people are looking at other countries and seeing what’s worked/working (Sweden, for example).
But the GOP has so convinced everyone that government is the enemy, that even our really smart host here gets the shakes when he thinks about nationalizing the banks (which as others have pointed out is just a capital injection with taxpayer benefits should things work out).
John – don’t get me wrong, I’m not accusing you of anything. Just saying that the GOP has poisoned the debate about what government should/shouldn’t do for the financial sector – much like they poison reasonable debates with ridiculous hyperbole regarding environmental regulations, taxation levels, health care and so on.
To me, Reagan started pushing the "government is the enemy of freedom" line back during the implementation of Medicare, and then ramped it up dramatically with the "most dangerous words in the English language" speech in 1980 (?). The GOP latched on to this concept like it was the fresh corpse of a virgin and they the hungry vampire.
And it’s been screwing our country ever since.
cjenk
Exactly. You’re so afraid of anything that looks like socialism. I’m more worried about what might happen if we nationalize the banks and it still doesn’t restore confidence in our financial system. Maybe it would have worked at a time when people believed our government would never default. Could this hurt us even more?
Dave So
The RBS Record loses of 24Billion UK pounds and Fred Goodwin still gets 650k pension every year. That is just unbelievable! They should strip him of his pension.