“Government owning a take in any private U.S. company is objectionable to most Americans – me included. Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable.”
-Hank Paulson
That’s a slippery slope my friends. When we allow the government to make the decision on when it is right to alter the fundamental economic principles on which our great nation was founded, we move one step closer to a Socialist (and possibly a Communist) society.
So what’s the fuss?
Well, the government put into play a plan that will allow for $250 billion in taxpayer money to be directly injected into nine of the nation’s largest banks. For this investment, the government will receive preferred shares of stock (I think we can all agree that no one wants the government to have voting rights in private companies) and the ability to legislate executive pay (i.e. no more golden parachutes).
Thus in essence the government has ownership in the country’s largest financial institutions. A nationalization of the banking industry. A scary proposition to say the least.
Furthermore the plan includes money to buy troubled assets from banks, insure deposits into non-interest bearing bank accounts (used by businesses to house payroll cash), and back senior unsecured debt from banks. This combination of moves has been put in place to put liquidity within these financial institutions and to invoke investor confidence to park their money with banks so that the credit crunch can loosen at a quicker pace.
Might this plan work?
Sure.
But we are living in very tumultuous times. By moving the line of demarcation between capitalism and socialism, we set new precedent. We can only hope that the line can be moved back in the future – should this plan work successfully.
