Herman

Cain

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October 20, 2008

Far from Nationalization, Purchase of Bank Stocks Is a Win-Win for Taxpayers

Earth to taxpayers! Owning stocks in banks is not nationalization of the banking industry. It’s trying to solve a problem.

The unprecedented financial crisis has caused the Treasury of the United States to take unprecedented measures to help solve the problem of frozen credit and cash flow for U.S. businesses.

Most of us had dreams of what we wanted to be when we grew up as children. Some of us wanted to grow up and become a fireman, a policeman, a doctor, a nurse, a lawyer, a teacher, an actor, an engineer, a writer, a dancer, a chef or any number of other professions.

But some of us wanted to own a bank because that’s where the money is!

Wake up people! Owning a part of the major banks in America is not a bad thing. We could make a profit while solving a problem.

But the mainstream media and the free market purists want you to believe that this is the end of capitalism as we know it. It is not for several reasons that they have conveniently not explained.

First, instead of buying toxic mortgage-related assets of banks as originally proposed, the Treasury has changed tactics and will buy equity positions called preferred stocks, which gives us as taxpayers an ownership stake in their success for a limited period of time.

Preferred stock means we get paid a dividend before any other stockholders get paid a dividend when they make a profit. You got a problem with that?

Second, the purchase agreement between the Treasury and the participating banks has an incentive for the banks to re-purchase the stock back from the Treasury within five years.

If the banks do not re-purchase the stock in five years then we get a bigger dividend until they do re-purchase the stock. That’s a good deal!

The free market purists’ objection to this is that it smacks at government control of the banking industry, which is called nationalization. They are correct. It smacks, but it is not nationalization because that would require the government to own at least 51 percent of the entity for an indefinite period of time.

The ownership by the taxpayers is going to be relatively small and nowhere near the amount needed to be called nationalization. So what’s the problem?

The problem is economic illiteracy and media incompetence. Some people want to continue to fan the flames of anger and outrage over how we got into this mess in the first place. Anger and outrage will not solve the problem.

Unprecedented problems require unprecedented solutions. The actions by the Treasury are a win-win for the taxpayer. But the mainstream media does not get brownie points for reporting win-win solutions for the taxpayers. Their focus is doom and gloom.

These actions by the Treasury, the Federal Reserve Bank and the actions by the Federal Depositors Insurance Corporation (FDIC) are all intended to help solve an unprecedented financial crisis. Unlike steps taken prior to and during the Great Depression, these actions have a high probability of success.

In order for these collective actions to work, the media needs to calm its crisis rhetoric, and Congress needs to just shut up with its political rhetoric.

Now don’t tell Nancy Pelosi and Harry Reid, but if this works, and I believe it will, the Bush Administration will have gotten this one right.

As we say in the South, y’all hush!

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