Trying Different Things unto Socialism
Yeah, I gotta vote “no” on this one:
Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials.
Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones.
The Treasury plan was still preliminary and it was unclear how the process would work, but it appeared that it would be voluntary for banks.
“Restore confidence” is another way of saying “promise public backing and rescue.” That’s exactly what created the environment in which Fannie and Freddie allowed things to get so out of whack.
If we’re not going to let the market be the market, then give a quick infusion of cash, with some strings ensuring repayment to the government, and leave it alone. You can’t cure a sickness with more of the same poison.