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WASHINGTON — The Bush administration is considering taking ownership stakes in a number of U.S. banks as one option it might use to deal with a serious credit crisis, an administration official said Wednesday.
This official, who spoke late Wednesday on condition of anonymity because no decision has been made, said the $700 billion rescue package passed by Congress last week allows the Treasury Department to inject fresh capital into financial institutions and get ownership shares in return.
This official said that all the new powers granted in the legislation were being considered as the administration seeks to deal with a serious credit crisis that has already caused the biggest upheavals on Wall Street in seven decades.
A decision to inject capital directly into financial institutions in return for ownership stakes would be similar to a plan announced earlier Wednesday by Britain.
Asked about the British approach, Treasury Secretary Henry Paulson did not reject the idea but said he did not want to speculate on which of the new powers would be employed.
"We have a broad range of authorities and tools," Paulson told reporters. "We've emphasized the purchase of liquid assets, but we have a broad range of authorities. And I'm confident we have the authorities we need to work with going forward."
So let me understand this: nationalizing banks is ok, but nationalizing health care is not? We're going to float the very people that got us into this mess, but not help make health care affordable and universal? Education affordable and universal? I'd rather be healthy, smart and poor then rich, sick and dumb. Our priorities have to change, or they're going to change us.
— Josh, NY
Maybe I'm preoccupied with a deck chair while the Titanic sinks, but I worry about government ownership in a different way.
If the feds own significant shares of banks and corporations and have significant representation on their boards, what's to keep them from politicizing them and having them serve government interests rather than those of the bank or corporation? I really truly don't want to see partisanship and all the boondoggles we see in national politics also built into private entities.
We've already had a demonstration of the wreckage politicalization can cause when Congress encouraged Freddie and Fanny to take on loans nobody else would buy. Not only did it worsen our current situation, but it sent a tacit message that imprudent risk was not only okay but encouraged.
I hope we take a long look down this road before we start down it.
— Don, Philadelphia
Originally posted by Areal51
If the government takes ownership in banks, will that then give it the right to view the financial transactions of depositors?