Bank Nationalization Attracts GOP Support
Rep. Maxine Waters was lambasted as a left-wing radical last year when she raised the idea of nationalizing the oil industry. But on a Sunday morning talk show, a Republican senator came off even more supportive than her of nationalizing banks.
"I would not take off the idea of nationalizing the banks," Sen. Lindsey Graham (R-S.C.), said on ABC's "This Week with George Stephanopoulos."
Graham, a confidant of former Republican presidential nominee Sen. John McCain (Ariz.), said that the problems in the economy and the financial sector are so severe that U.S. policy makers may have to start thinking about things once labeled unthinkable.
"This idea of nationalizing banks is not comfortable," said Graham, appearing downcast. "But I think we have gotten so many toxic assets spread throughout the banking and financial community throughout the world that we're going to have to do something that no one ever envisioned a year ago, no one likes."
Graham's remarks come months after then President Bush and his treasury secretary, Henry Paulson, bailed out major companies in the financial sector and successfully persuaded Congress to pass a $700 financial rescue package that triggered concerns about nationalizing banks.
Waters (D-Calif.), who was ripped on blogs as a "communist" and "tin-pot collectivist," after suggesting a government takeover of the oil industry at a hearing on gasoline prices, was more reluctant.
"The word ‘nationalization' scares the hell out of people," Waters said. "Citibank is probably almost nationalized with the amount of money that we've put in it. But I don't think that we are ready to move to the point of a formalized nationalized banking program yet."
It was left to Sen. Charles Schumer (D-N.Y.), whose state includes the capital of the financial sector, to dismiss the idea of nationalizing banks.
"I would not be for nationalizing," Schumer said. "I think government's not good at making these decisions as to who gets loans and how this happens."
The prospect, though, was raised by two New Yorkers who are free-market economists. Matthew Richardson and Nouriel Roubini, professors at New York University's Stern School of Business, penned an op-ed in Sunday's Washington Post entitled "Nationalize the banks! We're all Swedes Now."
"We feel downright blasphemous proposing an all-out government takeover of the banking system," they wrote. "But the U.S. financial system has reached such a dangerous tipping point that little choice remains."
Many other economists have also suggested nationalizing banks. So much so that as he rolled out his broad strategy for dealing with the troubled financial sector last week, Treasury Secretary Timothy Geithner found himself discouraging speculation that the federal government might nationalize banks.
"We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system," Geithner said.
Waters raised the prospect of taking over oil companies as she scolded oil executives at a May 2008 congressional hearing as gasoline prices headed for $4 a gallon.
"Guess what this liberal would be all about. This liberal will be about socializing," she said, pausing, "would be about, basically, taking over, and the government running all of your companies."