Government Ownership of Banks?

Kerby Anderson, Point of View: One of the lingering questions about the bailout is how long the government will have ownership of the banks. At the moment, the federal government is planning on purchasing $250 billion worth of shares in American banks. Is it possible that government will hold the bank shares indefinitely? Terrence Jeffrey of CNSNews.com believes that this could be an unintended consequence. Let me explain.

While the law doesn't say that government can buy ownership interest in banks, it does allow purchases in "any financial instrument that the secretary, after consultation with the chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability." This act also allows "such actions as is necessary, that the secretary might deem."

So how long can the treasury secretary hold these assets? Actually, the law sets no limits. A Treasury spokesman told CNSNews.com that: "We can hold them for as long as we want." Now, let’s be fair, Treasury Secretary Hank Paulson does not envision the government having a permanent ownership stake in various banks. But let's also be realistic. He won't be the treasury secretary next year.

The plan that was drafted envisions the government selling the stock back to the banks. It also prevents elected officials from using government ownership of the banks for their own political advantage. This is oversight actually takes place through the Office of Thrift Supervision, the Office of the Comptroller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Corporation.

Now the plan does allow banks to buy back its shares from the government in the first three years, if it can raise 25 percent of the value of the shares by selling stock. But these are subject to the approval of the primary bank regulator. But the bottom line is this: banks are not guaranteed they can buy back their stock. Although Congress didn't intend for government to permanently own banks, it is possible they may do so anyway. I'm Kerby Anderson, and that's my point of view.
Also See: Five Threats - facing America & New President [Summary: terrorist attack, actions by Russia, Iran & nuclear weapons, political chaos in Pakistan, and rising cost of energy and vulnerability of energy supply lines.]

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