U.S. Government Begins Nationalizing American Businesses

Let the party begin:

The U.S. government will start doling out $125 billion to nine major banks this week to get credit flowing again, but Monday’s announcement offered cold comfort to investors as rising anxiety about a worldwide recession drove stocks down sharply around the globe. 

Assistant Treasury Secretary David Nason said the deals with the nine banks were signed Sunday, and the government will make the stock purchases this week. The deals are designed to bolster the banks’ balance sheets so they will begin more normal lending. 

The action will mark the first deployment of resources from the government’s $700 billion financial rescue package passed by Congress on Oct. 3. 

What I find most interesting is this:

Treasury has given the go-ahead for stronger banks to use the money it receives in the rescue program to acquire weaker banks. That has prompted criticism the government should not be financing the consolidation of the banking system – in effect helping to choose winners and losers. 

This doesn’t surprise me a bit: it’s just another way for government to expand its ownership without direct expenditures. As far as “choos[ing] winners and losers,” government’s been doing that for decades.

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