Wednesday, October 8, 2008

THE DARK CLOUD IS GETTING THICKER: Treasury May Take Ownership Stake In Banks

This is the scariest comment I have ever written, anywhere. News that the Treasury may take ownership stakes in banks has pushed me over the edge.

I am quite confused and concerned as to what is going on in America. Things are moving very fast in a direction of more and more central government control, and we are talking real fast, under an administration that is scheduled to be out of power in January.

And a lot of things just don't make sense.

Part of the financial crisis, we have been told, was caused by the fact that the two major mortgage finance companies, Fannie Mae and Freddie Mac, were quasi private and quasi government entities and that this confused the goals of the two entities. Were they suppose to serve the "public" or seek profit?

So what is the Treasury considering? Taking ownership positions in many banks!!

Apparently, the sentences put out by the PPT that I highlighted earlier today are being taken very seriously as operational possibilities by Treasury, at least for financial institutions, according to Mark Landler and Edmund L. Andrews at NYT (My emphasis):

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, still preliminary, 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.

I have received many emails from readers asking me why I haven't commented on the news that the Fed was going to directly buy commercial paper. The answer is that I was stunned by the news and simply wanted to collect my thoughts on the subject before commenting. This additional news of Treasury stakes in banks, even healthy banks, has me completely floored.

I am not sure what to make of all this. But, government ownership of pieces in financial institutions and government becoming a major finance source of American industry through the purchase of commercial paper is as astounding, as it is scary.

Many have thrown around the word socialism when discussing the Paulson "bailout" bill, up until now I have refrained from doing so. Buying mortgages is one thing. But in addition, buying into banks and buying commercial paper from industry IS EARLY-STAGE SOCIALISM.

Again, all this is occurring during the final hours of the Bush Administration, including bizarre troop movements. The 3rd Infantry’s 1st Brigade Combat Team, has been brought back to the U.S. from Iraq as "an on-call federal response force for natural or man made emergencies and disasters, including terrorist attacks."

The BCT is an army combat unit designed to confront an enemy within a war theater.

As Michel Chossudovsky asks, "With US forces overstretched in Iraq, why would the Pentagon decide to undertake this redeployment within the USA, barely one month before the presidential elections?"

The Army Times reports, "this new mission marks the first time an active unit has been given a dedicated assignment to NorthCom, a joint command established in 2002 to provide command and control for federal homeland defense efforts and coordinate defense support of civil authorities."

Something isn't right. Make that, something is very wrong. Be very alert.

1 comment:

  1. The troups are here to prepare for the time when Bush, yes, Bush declares "Marshall Law" (it was approved as part of the Miliatary Act of 2007). I believe Marshall Law will be declared by Bush before he leaves office. W will declare Marshall Law when he decides there is an emergency, like the Democrats win in our next election, the financial problems the country is now in, what ever he decides is an emergency. If people reading this think this is crazy, apparently they have not been paying attention to what has been going in this country for the last 8 years. And yes, it is very scarey!