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  1. #1
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    Lindsey Graham says that we may have to nationalize the banks

    Graham Wouldn’t Reject Idea of Nationalizing Banks

    Feb. 15 (Bloomberg) -- Republican Senator Lindsey Graham, who sits on the Senate Budget Committee, said he wouldn’t reject the idea of nationalizing U.S. banks.

    “I’m very much afraid that any program to salvage the banks is going to require the government,” the South Carolina senator said today in an interview on ABC’s “This Week” program. “I would not take off the idea of the nationalizing the banks.”

    Bank of America Corp.’s stock-price descent, down about 60 percent this year, gained momentum earlier this month on speculation that the government might seize the company. The U.S. already agreed to inject $45 billion and protect the Charlotte, North Carolina-based lender from losses on $118 billion of loans and securities after it bought Merrill Lynch & Co.

    Citigroup Inc., whose shares have dropped 87 percent in a year, needed $20 billion in government money in November on top of an earlier $25 billion injection. That wasn’t enough to keep it from announcing plans to split itself into two companies after posting a $8.29 billion fourth-quarter loss, completing its worst year, as the credit crisis eroded mortgage-bond prices and customers missed more loan payments.

    Graham, without naming any banks, said “toxic” assets spread throughout the banking and finance sectors may require further government help of a kind not envisioned a year ago.

    “To me, banking and housing are the root cause of this problem,” Graham said. “If you don’t stabilize housing, you’re never going to fix this problem. You’ve got a huge inventory problem. You’ve got foreclosures that have to be dealt with. And that goes back to banks.”

    Democratic Senator Charles Schumer, speaking on the same program, said he isn’t in favor of nationalization for banks.

    “I think government is not good at making these decisions as to who gets loans and how this happens,” the New York senator said.

    Representative Maxine Waters said on ABC that “the word nationalization scares the hell out of people, and so the debate has opened up now, and that’s good.”

    “Citibank is probably almost nationalized with the amount of money we’ve put in it,” the California Democrat said. “But I don’t think that we are ready to move to the point of a formalized nationalized banking program yet.”
    Bloomberg
    Когда́ де́ньги говоря́т, тогда́ пра́вда молчи́т

  2. #2
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    This could get ugly. We def don't need to nationalize anything, especially the banks.


    Come to psd where admitted dupes who do nothing but troll the gd and fs forum are free. But man don't you dare mention trolling on someone's wall.

  3. #3
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    It's not as though nationalization hasn't happened before, however. What would be more concerning would be the timeline -- and how long they would stay nationalized. I think that's where the real debate will come from, but I do think there would be substantial discussion on this matter in the near future.
    Когда́ де́ньги говоря́т, тогда́ пра́вда молчи́т

  4. #4
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    I don't like the idea of the government controlling/majoritally owning where I have my life savings.

    AT ALL!

  5. #5
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    Quote Originally Posted by SmthBluCitrus View Post
    It's not as though nationalization hasn't happened before, however. What would be more concerning would be the timeline -- and how long they would stay nationalized. I think that's where the real debate will come from, but I do think there would be substantial discussion on this matter in the near future.
    Yea and it was a bad idea then too.


    Come to psd where admitted dupes who do nothing but troll the gd and fs forum are free. But man don't you dare mention trolling on someone's wall.

  6. #6
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    It was? Explain.
    Когда́ де́ньги говоря́т, тогда́ пра́вда молчи́т

  7. #7
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    Quote Originally Posted by SmthBluCitrus View Post
    It's not as though nationalization hasn't happened before, however. What would be more concerning would be the timeline -- and how long they would stay nationalized. I think that's where the real debate will come from, but I do think there would be substantial discussion on this matter in the near future.
    I agree with that in part. It's not really that we need to nationalize, but if we had actually bought up capital instead of debt last year, we wouldn't be in this situation now.

    The combined stock value of the companies that we bailed out doesn't come anywhere near the total amount of money that we injected into those companies.

    The government should force the companies to issue non-voting shares in their company for the government to buy. Once the banks/institutions are stable, they can rebuy those shares from the government at market value.

    That injection of capital will reopen the credit markets. The banks will make money again, and the government will be paid back for the stock. Any potential profits can be passed back to the taxpayers in a tax rebate in 2010.
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  8. #8
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    Question for you ari:

    Is what you're proposing in the above post similar to what Roosevelt did in 1933 with the Reconstruction Finance Corporation when he worked to reopen the banks after the week-long bank holiday by buying up preferred stocks?

    Because, in my eyes it would appear so with one caveat. Weren't some banks also nationalized, liquidated, with some of the stronger banks able to swallow up the salvageable assets?

    I'm really a layperson when it comes to this sort of thing -- it's certainly not my area of expertise.
    Когда́ де́ньги говоря́т, тогда́ пра́вда молчи́т

  9. #9
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    Quote Originally Posted by SmthBluCitrus View Post
    Question for you ari:

    Is what you're proposing in the above post similar to what Roosevelt did in 1933 with the Reconstruction Finance Corporation when he worked to reopen the banks after the week-long bank holiday by buying up preferred stocks?

    Because, in my eyes it would appear so with one caveat. Weren't some banks also nationalized, liquidated, with some of the stronger banks able to swallow up the salvageable assets?

    I'm really a layperson when it comes to this sort of thing -- it's certainly not my area of expertise.
    Yes and yes. And the downside of the weaker banks being gobbled up is that it led to much more debt in the hands of the stronger banks -- which weakened them to the point that, coupled with decreased fiscal spending, dropped us into the 1937 recession.

    There's a reason why small banks are recording record profits while big banks are getting bail-outs. The economies of scale benefits from large-scale banking don't outweigh the costs associated with potential large scale defaults.

    Smaller banks can weather the storm a lot better since they don't have to take on huge amounts of risk to try to be the most profitable bank.

    Sometimes the tortoise beats the hare.
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  10. #10
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    OK, well if that's the case, why can't an organization similar to the RFC protect the larger banks by buying up their preferred stock in order to stave off instability?

    Because, in the end, doesn't that money end up back with the tax payers?
    Когда́ де́ньги говоря́т, тогда́ пра́вда молчи́т

  11. #11
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    Quote Originally Posted by SmthBluCitrus View Post
    OK, well if that's the case, why can't an organization similar to the RFC protect the larger banks by buying up their preferred stock in order to stave off instability?

    Because, in the end, doesn't that money end up back with the tax payers?
    Yes. I said it back in August, and I'll say it again now. Yes that would work.

    Unfortunately, the Bush Admin pushed TARP through with no questions asked. And now it looks like the Obama Admin doesn't really want to bother with an alternative to it.

    Don't get me wrong. TARP will work. It's just that it's a much less cost-effective method of righting the ship. But it is much more profitable for the execs collecting their fat bonus checks.
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  12. #12
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    OK -- thanks for the clarification on all that.
    Когда́ де́ньги говоря́т, тогда́ пра́вда молчи́т

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