Stress-testing Us!

So, before the government takes further steps to support the financial system, there will be a "stress test" to see how the biggest banks would do in an even weaker economy? I'll tell you who's being "stress tested." It's us.

If the banks need more, we're told, the government might have to act. But don't worry -- it won't be a government takeover. A takeover would be "surprising," the head of the Federal Deposit Insurance Corp told CBS this week.

It won't be a takeover, oh no, because a takeover would be bad. That's the drumbeat of the week.

Economist Paul Krugman makes the point that it's not entirely un-American to nationalize the banks. He's right. It's happened in the past. The bigger point is that even as the public -- and markets -- panic about nationalization via "takeover," our government has already actually nationalized much of banking. At least the risky part.

Taxpayers have already relieved banks of the risk of banking by recapitalizing the banks that squandered their capital and buying up or guaranteeing those banks' bad debts.

The "takeover" on the table now is the takeover of the profits part. That's the potential profit earned on taxpayer funds.

That's not scary socialism any more than privatizing profits while socializing risks is free market capitalism. It is giving taxpayers a fair deal. Instead of scaring us, government should be reassuring us of just that.

If it requires taking over banks for Americans to get value for their investment -- well -- that's what its going to take, they could say. Instead, I guess someone out there is hoping that as long as this terror talk about terrible "takeovers" keeps up, the public will be too stressed to figure out what's at stake.

Laura Flanders is the host of GRITtv which broadcasts weekdays on Free Speech TV (Dish Network Ch. 9415) on cable (8 pm ET on Channel 67 in Manhattan) and online right here at GRITtv.org or streaming live on The Nation.com Mondays through Thursdays from noon to 2 pm ET.

Comments (7)

1. Well, you know Ms Flanders....

   well-known Marxist Senator Lindsey Graham (Republican-South Carolina) supported nationalizing the banks!

   Posted by Mask at 02/25/2009 @ 10:48am

2. The govt being the largest shareholder in any business is a conflict of interest since the govt also makes the rules the business has to operate under.

   America should never nationalize any business unless it is a nation security issue as in the nuclear field for, example.

   Let the banks, as well as GM go under. Someone else will come along and rebuild either. And we have no shortage of banks and we are up to our asses in govt.

   Posted by YourJomamma at 02/25/2009 @ 11:32am

3. Let the banks, as well as GM go under. Someone else will come along and rebuild either. And we have no shortage of banks and we are up to our asses in govt.

   Posted by YourJomamma at 02/25/2009 @ 11:32am

   Dead on correct JM. Unfortunately there are few in govt with the exception of people like Senator Shelby who are willing to publicly make that statement.

   Posted by antisocialist at 02/25/2009 @ 11:43am

4. End government-mandated auto insurance....let the free market work it out!

   Right, Larry?

   Posted by Mask at 02/25/2009 @ 12:26pm

5. End government-mandated auto insurance....let the free market work it out!

   Right, Larry?

   Posted by Mask at 02/25/2009 @ 12:26pm

   I have no problem with that at all. My business succeeds because of me, not the govt.

   Posted by antisocialist at 02/25/2009 @ 12:42pm

6. I watched that lying waste of a Treasury Secretary, Timothy Geithner, actually say in a PBS interview this evening that none of the plans he has for the banks have the interests of the bankers in mind. And he said it with a straight face. He also said that he opposed nationalization. Wonder why.

   Timothy Geithner and his banker bought and paid-for boss, Barak Obama, will always see to the interests of their paymasters first and their refusal to nationalize our insolvent banking system is exhibit A. But their cosmetic half measures will simply delay the day of reckoning when the actual value of the outstanding bad debt their friends have engineered will need to be faced and a program of debt relief instituted. Yet in the meantime more and more suffering will be forced upon the American people. You'll begin to know their limits when the citizens of this country take to the streets the way 100,000 Irish did last week in Dublin. Then Mr. Geithner will get to know just how many find whole cloth in his claims about his programs' objectives.

   Posted by john lowell at 02/25/2009 @ 11:17pm

7. The govt being the largest shareholder in any business is a conflict of interest since the govt also makes the rules the business has to operate under.

   America should never nationalize any business unless it is a nation security issue as in the nuclear field for, example.

   Posted by YourJomamma at 02/25/2009 @ 11:32am | ignore this person | warn this person

   .

   Really john? I mean, I know your ego got a good stroke when Larry agreed with you but consider parcel delivery? Do you think UPS and Fed Ex have suffered because they are in competition with your favorite nationalized business...

   ...the US Postal Service?

   Or do you consider mail delivery to be "a national security issue"?

   Posted by Lillian at 02/26/2009 @ 12:19am