Thursday, April 23, 2009

Complete nationalization of banks on the way?

According to this column by Dick Morris, the Obama administration is considering converting the Treasury's current bank holdings into common stock. If true, this would amount to bank nationalization since the government would have voting control.

While this may or may not be too radical even for Obama, his Treasury secretary has now publicly stated that he won't allow banks to repay their TARP loans until he thinks it's in the "national interest," even though many of them want to repay right now to get out from under government control. This bodes ill for the private banking system. Now that the administration has its hooks into the banks, it may want to make the one sided embrace tighter and tighter.

Government control of bank lending would be a big step to the control of borrowers, which is to say control of the private economy.

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