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The Nation

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.


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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

Laura Flanders

Laura Flanders is a best-selling author and broadcaster who hosts the The Laura Flanders Show, where she interviews forward thinking people about the key questions of our time.  The LF Show airs weekly on KCET/LinkTV, FreeSpeech TV, and in English & Spanish in teleSUR. Flanders is also a contributing writer to The Nation and Yes! Magazine (“Commonomics”) and a regular guest on MSNBC. She is the author of six books, including The New York Times best-seller, BUSHWOMEN: Tales of a Cynical Species (Verso, 2004) and Blue GRIT: True Democrats Take Back Politics from the Politicians (Penguin Press, 2007). The Laura Flanders Show first aired on Air America Radio 2004-2008. You can find all her archives and more at or via Twitter @GRITlaura

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