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Thread: Which is the party of socialists again? Gov't to partially nationalize banks.

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    Friend of Gossip Rocks! buttmunch's Avatar
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    Default Which is the party of socialists again? Gov't to partially nationalize banks.

    The U.S. government is dramatically escalating its response to the financial crisis by planning to invest $250 billion in the country's banks, forcing nine of the largest to accept a Treasury stake in what amounts to a partial nationalization.

    News that European governments also planned to take stakes in their banks and anticipation of new U.S. measures unleashed a tremendous surge in U.S. stock prices yesterday, with the Dow Jones industrial average soaring to the biggest percentage gain since the 1930s, up 11.1 percent. It ended 936.42 points higher, the largest point gain ever, just days after the Dow had its steepest weekly decline in history.

    The Treasury Department's decision to take equity stakes in banks represents a significant reversal, coming just weeks after Treasury Secretary Henry M. Paulson Jr. had opposed the idea. In a momentous meeting yesterday afternoon in Washington, Paulson, flanked by top financial regulators, told the executives of nine leading banks that they needed to participate in the program for the good of the national economy, two industry sources said on condition of anonymity because they were not authorized to speak publicly.

    The government's initiative, which was to be announced this morning before the markets open for New York trading, is part of a wider plan that goes beyond the $700 billion rescue package approved by Congress earlier this month. The Federal Deposit Insurance Corp. is also set to announce today the launch of an insurance fund to guarantee new issues of bank debt. It will provide unlimited deposit insurance for non-interest-bearing accounts, which are widely used by small businesses for payroll and other purposes.

    In pressing the bank executives to accept partial government ownership, Paulson's message was clear: Though officially the program was voluntary, the banks had little choice in the matter. In exchange for giving the Treasury minority stakes, the nine firms would jointly receive an investment worth $125 billion. The government would make another $125 billion available for the next 30 days to thousands of other banks and thrifts across the country.
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    Federal officials set conditions, telling the banks they could not raise their dividends without government permission and could not offer their executives new retirement packages, though the old packages would remain intact.

    Paulson told them the moves would shore up confidence in their own institutions, spark lending throughout the system and send a message to smaller institutions that there is no stigma in accepting federal funding. Though some were reluctant, all of the executives complied.

    There is a risk that banks will take the new government capital and use it to bolster their balance sheets but still not resume lending, and the Treasury is not getting any specific contractual guarantee to prevent that from happening. But bank regulators, particularly the Federal Reserve, will lean heavily on the firms receiving infusions to use the capital to increase their lending to businesses and consumers.

    Taken together, the steps planned by the Treasury, the FDIC and the Federal Reserve amount to a monumental effort to jump-start the business of lending, which all but dried up in recent weeks as banks have lost faith in one another and their customers. Global markets began to melt down. Some emerging nations teetered on the brink of financial collapse.

    Over the weekend, global leaders agreed in meetings in Washington to launch a coordinated program of injecting cash into the world's banks and guaranteeing their debt. The action by U.S. officials yesterday represented the U.S. version of those broad principles, and it was matched by similar efforts in Europe yesterday.

    As part of the effort to flood the financial system with cash, the Federal Reserve made unlimited funds available early yesterday to other major central banks so they could inject money into banks in their countries and ease the shortage of dollars they face. Previously, the Fed's program of lending dollars to the European Central Bank, Bank of England, Bank of Japan and others had been capped at a total of $380 billion.

    Under the rescue legislation signed into law earlier this month, the Treasury is allowed to take equity stakes in banks.
    washingtonpost.com
    It almost amusing when the repugs scream 'Socialist' at Obama. THIS stuff is socialist.
    'Those who sacrifice liberty for security deserve neither.' Ben Franklin

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    Gold Member ymeman's Avatar
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    well, this is a good thing according to my mother because soon the "world bank" will take over and that means the rapture is right around the corner. Free door prizes at the pearly gates. Sigh...

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    The World Bank will not take over. It isn't a bank in the 'normal' sense. It works in development in third world countries and is joint 'owned' by nearly 200 countries.
    'Those who sacrifice liberty for security deserve neither.' Ben Franklin

    "When fascism comes to America, it will be wrapped in the flag and carrying the cross."
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    Gold Member ymeman's Avatar
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    yeah, but my mother doesn't know about the real world bank, the one you are talking about. This one she's talking about is from her anti-United Nations religious fiction (propaganda)...what is that series called/Left Behind, that's the name of it. What I'm saying is my mother doesn't 'get' that there really is an entity called the World Bank operating as we speak and if she did it would only be one more sign of the rapture. That's why I didn't tell her, it would only maker her squeal with delight.

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    Elite Member McJag's Avatar
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    Quote Originally Posted by ymeman View Post
    yeah, but my mother doesn't know about the real world bank, the one you are talking about. This one she's talking about is from her anti-United Nations religious fiction (propaganda)...what is that series called/Left Behind, that's the name of it. What I'm saying is my mother doesn't 'get' that there really is an entity called the World Bank operating as we speak and if she did it would only be one more sign of the rapture. That's why I didn't tell her, it would only maker her squeal with delight.
    You have my deepest sympathy. My friend had parents like that. She couldn't even tell them when she got flu and really needed help. They would have brought over a team to pray over her,instead.
    I didn't start out to collect diamonds, but somehow they just kept piling up.-Mae West

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    My mother was like that but then, she didn't trust computers either.
    'Those who sacrifice liberty for security deserve neither.' Ben Franklin

    "When fascism comes to America, it will be wrapped in the flag and carrying the cross."
    --Sinclair Lewis

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    A*O
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    What happened last week goes beyond politics. The Govts had to intervene or there would have been riots. Seriously. That's why those troops were deployed in the US "on exercises" IMO. It was to prevent mass civil unrest.
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