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US Taxpayers May Soon Own 40% of Citigroup, No Nationalization
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by Tina Kells | February 23, 2009 at 02:47 pm
129 views | 10 Recommendations | 1 comment
While panic still ravages the market under fears that Washington will nationalize the US banking system the government announced today that it could buy up to 40% of Citigroup's common shares to keep the bank in business.
With a 40% interest in Citigroup US taxpayers would be the single biggest investor in the faltering bank and yet rhetoric abounds warning citizens of the danger of a nationalized banking system. The message is clear, "you can buy it, but you can't run it!"
Taxpayers could be on the verge of owning as much as 40% of the lender's common stock, the Wall Street Journal (WSJ) reported.
The bank made an $8.29bn (£5.6bn) loss in the final three months of 2008 and was forced to split into two new firms.
The government has said it preferred banks to remain in private hands.
A joint statement from the Treasury, the Federal Reserve and other regulators concluded: "The strong presumption of the Capital Assistance Programme is that banks should remain in private hands."
The statement also reiterated that, "the US government stands firmly behind the banking system" and added that regulators would ensure banks have capital and the liquidity to provide the credit needed to restore economic growth.
Citigroup can not survive without government assistance and yet the attitude prevails that important business decisions should continue to be made by the executives who drove the bank into the ground.
Nationalization, also spelled nationalisation, is the act of taking an industry or assets into the public ownership of a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being state operated or owned by the state. The opposite of nationalization is usually privatization or de-nationalisation, but may also be municipalization. A renationalization occurs when state-owned assets are privatized and later nationalized again, often when a different political party or faction is in power.
Nationalized banking systems are not synonymous with socialist government, although those in the US banking world would have people believe otherwise. Many very democratic nations have nationalized banking systems and some notable economists believe that nationalization is the only thing that can save the American dream.
Economists Nouriel Roubini and Nassim Taleb, who predicted the global economic downturn, have called for a nationalization of banks in order to stop the financial meltdown. Do you agree?
The fact of the matter is, the banks are in very bad shape. The U.S. government has poured in hundreds of billions of dollars to very little effect. It is very clear that the banks have failed. American citizens have become majority owners in a very large number of the major banks. But they have no control. Any system where there is a separation of ownership and control is a recipe for disaster.
Nationalization is the only answer. These banks are effectively bankrupt.
US taxpayers are being fed a spoonful of misguided fear about what a nationalized banking system means. They are being told that while it is OK for the government to buy a majority of interest in Citigroup it is not OK for the government to step in and help run things.
Instead taxpayers are being led to believe that the best thing for the country is to leave the running of the banks in the hands of the private individuals whose mismanagement grossly contributed to the current economic crisis. Is that logical?
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Most RecentMost Recommended Comments (1)
at 15:23 on February 23rd, 2009
I guess we won't be called, "capitalist pigs" much longer