Historian Argues Bailout Is Far Cry From Socialism

While there are certainly arguments to be made in opposition to the recent bail out plan, Andrew M. Schocket writes at The History News Network that the plan is a far cry from socialism as many on the right claim. Partial government ownership of banks is also not unprecedented in the United States:

“Socialism!” That’s the alarm many conservative commentators and legislators are sounding about the latest development in Washington’s bank bailout scheme. Critics worry that the latest bank rescue plan will begin a slippery slope towards socialism or at least a day when government officials run American businesses, the American economy and, eventually, American lives.

But this isn’t the first time the U.S. government has held stock in banks, and the nation never turned to socialism. Unless the government’s investment in banks comes with effective government oversight, the real problem is that banks will continue to have too much autonomy rather than too little.

As part of the federal government’s financial bailout plan outlined over the past few days, President Bush and Treasury Secretary Henry Paulson joined an international effort to help troubled banks by buying stock in them. Their hope is that the government’s investment will get the banks to lend more money. It would also assure bankers that the loans they give each other are safe (banks actually lend each other money on a regular basis). Then money will start flowing again between banks and to businesses that right now can’t get the credit they routinely depend upon. If the plan succeeds, when the economy finally improves and the stock market goes back up, the government could sell its bank stock and probably make a profit for taxpayers.

Despite some concern about the United States becoming socialist, partial government ownership of corporations, especially banks, dates back to the beginning of the nation. When the government did own a piece of banks, businessmen elected by bank shareholders — not government officials — sang the tune, much to the dismay of the legislators and their constituents who warned that banks had too little public oversight.

Many of America’s first banks were owned partly by either state governments or the national government. These included the first Bank of the United States, established in 1791, in which the federal government held 20 percent of all shares. Among the states, Pennsylvania in particular owned stock in numerous banks, beginning in 1793 with a third of the Bank of Pennsylvania. How much of a stake our current government will buy in individual banks remains to be seen, but it will probably not be more than a quarter of any given bank.

Be Sociable, Share!

No Comments

1 Trackbacks

Leave a comment