T Nation

Banks to Be Used to Push Policy?

Does our government have itself a shiny new toy?

[i]…In any event, government ownership of banks has frightening long-term implications, whether or not it alleviates the credit crunch.

Government ownership means that political forces will determine who wins and who loses in the banking sector. The government, for example, will push banks to aid borrowers with poor credit histories, to subsidize politically connected industries, and to lend in the districts of powerful members of Congress. All of this is horrible for economic efficiency.

Government pressure will be difficult for banks to resist, since the government can both threaten to withdraw its ownership stake or promise further injections whenever it wants to modify bank behavior. Banks will respond by accommodating government objectives in exchange for continued financial support. This is crony capitalism, pure and simple.

Government ownership of banks will not be a temporary expedient. Politicians can swear they will unwind the government’s position once “economic conditions improve,” but no one can enforce this promise. The temptation to use banks as a political tool will be permanent, not temporary, so government ownership will continue for decades, or forever…[/i]
http://www.cnn.com/2008/POLITICS/10/14/miron.banks/index.html

Community banking executives around the country responded with anger yesterday to the Bush administration’s strategy of investing $250 billion in financial firms, saying they don’t need the money, resent the intrusion and feel it’s unfair to rescue companies from their own mistakes. …

And in offices around the country, bankers simmered.

Peter Fitzgerald, chairman of Chain Bridge Bank in McLean, said he was “much chagrined that we will be punished for behaving prudently by now having to face reckless competitors who all of a sudden are subsidized by the federal government.”

At Evergreen Federal Bank in Grants Pass, Ore., chief executive Brady Adams said he has more than 2,000 loans outstanding and only three borrowers behind on payments. “We don’t need a bailout, and if other banks had run their banks like we ran our bank, they wouldn’t have needed a bailout, either,” Adams said.

http://www.washingtonpost.com/wp-dyn/content/article/2008/10/14/AR2008101403378.html?hpid=topnews

Just Because it’s related to semi-nationalization ouf our banks…

Undertakers deliver last rites for US capitalism

[i]The Cash Room of the US Treasury, with its marbled walls, faux columns and giant chandeliers, was an oddly appropriate place to bury free market capitalism.

For a few minutes all was still, apart from the buzz of the camera crews lined up to film the funeral. The podium stood empty, flanked with two giant flags. Behind it an open door revealed six more flags, as if an abundance of stars and stripes would reassure a troubled nation that the partial nationalisation of America’s banking system was indeed a truly patriotic act…[/i]
http://us.ft.com/ftgateway/superpage.ft?news_id=fto101420081712196310&page=1

Accepting federal money, whether you are a local government, state government, or private org., is a lot like making a deal with the devil. Money for education and roads has always been a huge tool to use against state’s rights.