Tuesday, February 24, 2009

Nationalization and Predators-at-Large

All the major newspapers today have stories about the new administration's nationalizing our biggest banks as a way to deal with assets which have proven to be liabilities instead..

Nationalization sounds so radical, but the postal service has been nationalized for years, and the U.S. government owns Amtrak. Intelligence, as we know it, is nationalized, hence the Department of Homeland Security.

The talk from Obama's people is of the government taking partial interest temporarily in our nation's top 20 most troubled banks, the ones most likely to fall, and the ones most likely to take the FDIC along with them. If this is what it takes to solve the problem of the unchecked exploitation of the American consumer, for a generation or more, by virtue of behemoth interest rates, then so be it.

If I understand it correctly, nationalizing the banks essentially means that the government will guarantee banking giants like Citigroup against bad debt. We've already seen this with the bailout of Fannie Mae and Freddie Mac---the government is, in essence, underwriting all the mortgages that have gone south.

But, most of the focus of "predatory lending" is not on the lenders, and instead on those who got bank loans who weren't in a position to pay off their mortgages. We need a seismic shift of attention from those unqualified folks who took out the mortgages to the predators who encouraged them to do so.

The media is quick to focus on sexual predators, but is sadly lacking when it comes to exposing financial predators, usurers, carpetbaggers, and those who look to make bundles of money off the misfortune of others.

We see financial predators in every area of American life from credit cards to mortgages to the folks who make zillions off war, our nation's prisons, and the death penalty. If there's a way to realize profit, regardless of the moral subtext, the predators will be out in force.

The underlying question of usury by the banking industry, credit card companies, Wall Street, mortgage companies is not addressed, and until it is, nationalization can only work as a short-term solution. Until financial predatory practices are acknowledged, and resolved, another future economic meltdown is inevitable.

There needs to be greater oversight, and regulation, of the credit card industry, and banks that have been routinely scalping people with unwieldy interest rates. Many who have faced home foreclosure ended up losing their homes because they attempted to pay down their credit card debt.

This problem must be acknowledged before it can be rectified. If temporarily nationalizing the banks means subjugating the profit motive to the greater good, then it might be a step in the right direction, but facing the issue head-on is a better bet.

Until we recognize, and work to eliminate, predatory practices, and free market usury, we will not have solved the problem.

Ultimately, the gravest danger from nationalization comes from concentration in any one central body which may lead to nationalism, and more global predatory practices.