Chris Dodd Pulls a Hillary Clinton on the Banks

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Senator Chris Dodd may have just pulled a Hillary Clinton. . .
Like Clinton who just sent the media into a tizzy by referring to North Korea’s leadership succession struggles and thus prompting a mad dash to understand whether she was now looking beyond Kim Jong Il or encouraging a coup, Senator Dodd has caused ripple effects with his comments about possibly nationalizing Citibank and Bank of America.
This from a Bloomberg report on Dodd’s interview with Al Hunt:

Christopher Dodd said it may be necessary to nationalize some banks for a short time as Citigroup Inc. and Bank of America Corp. tumbled today on concern the U.S. may take over both banks.
“I don’t welcome that at all, but I could see how it’s possible it may happen,” Dodd said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” to be broadcast later today. “I’m concerned that we may end up having to do that, at least for a short time.”

I just withdrew some cash from Citibank and plopped it into my credit union account. I’m under the FDIC insurance limits, but still, do I really want a lot of assets caught up in a bank about to be nationalized?
No. And I should have withdrawn the money anyway when I saw that Robert Rubin had received more than $100 million for “consulting.”
As I write this, Citibank is at $1.68 a share, down 30%.
Bank of America is at $2.53, down 35%.
If Hillary Clinton wants a coup in North Korea or hopes to derail the Six Party Talks, then her comments were on target.
But if Chris Dodd, an otherwise great guy, wants to help stabilize markets and build confidence in whatever it is the administration is trying to do, he should either just nationalize the banks — or not.
But don’t publicly flirt with the idea of doing so.
— Steve Clemons

Comments

14 comments on “Chris Dodd Pulls a Hillary Clinton on the Banks

  1. jamzo says:

    the price of bank stocks went down
    surprise!
    many banks have bad loans and securities on their balance sheets – metaphorically referred to as “toxic assets”
    if the stock prices go up we know that investors are happy about the degree to which the taxpayers will relieve the banks of their”busniness losses”
    investors are famuous for their free market and capitalist economics fervor

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  2. PissedOffAmerican says:

    Solutions?
    All we see is these partisan hacks in Washington, on both sides, disagreeing 180 degrees on what should be done. If the world economy is in the crisis they claim it is, (and I believe it is actually worse than what they are asserting), than these divisive pieces of shit should stop their bickering, finger pointing, and blame shifting, and work together to solve this crisis. Instead, all we get is this vicious partisan horseshit from both sides, as more and more Americans lose hearth and livelyhoods. Thanks to these bastards, we really can have very little faith in ANYTHING they tell us, nor can we look back in time to recieve reassurance that they are competent to solve a damned thing. The smarter ones, undoubtedly, are in self interest mode, and are looting the coffers as we speak. Obviously, they’re ALL fuckin’ criminals, or they would not have arisen to any status in this current cesspool of Washington fops and fuck-ups.
    How we can reasonably expect this lawless and divided bunch of jackasses to act in OUR best interests when we have the festering wounds of eight years of cowardice on the one side, and eight years of constitutional abuses on the other side?
    We see Obama doing things like REMOVING the provisions that guarantee illegal aliens will not get the jobs american citizens NEED AND WANT, and we see the Republicans slicing the balls off of any right wing representative that dares reach across the aisle to actually work to find answers and solutions to our current slide into the abyss.
    As I’ve commented here on numerous occassions, we are in REALLY DEEP SHIT. And the efforts Bush and this satanical ghoul Cheney have put into dismantling Posse Comitatus, removing the protection of Habeaus Corpus, and accelerating the develpment of crowd control weaponry does not exactly instill optimism that our problems are not far far worse than we’ve been led to believe. Nor, considering the above mentioned efforts, is it really reasonable to doubt that our fall has not been planned for, and even, possibly, by design.
    Start with the loss of 2 TRILLION dollars under Dov Zakhiem’s greasy little tenure, and work your way forward. If you can start at that point, and examine events since, yet still have any optimism that these people in Washington give a shit about your best interests, then you are hopelessly in denial. New Orleans wasn’t good enough for these bastards. They intend to do the same thing to the whole country.
    Put in a garden, you’re going to need it. I wish I liked venison, because something tells me I’m gonna have a belly full by the time this is over.

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  3. Dan Kervick says:

    I assume that when Steve expresses concern about his assets being caught up in a bank about to be nationalized, what he means is that he owns *stock* in some of these banks, and doesn’t just have deposits there. As for deposits themselves, I can’t think of where I would rather have them than at a bank soon to be run by the feds.

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  4. Tom says:

    Steve,
    I’m more than a little surprised that you would fear for your funds under “nationalization” of your bank. Since the whole point of temporary federal ownership, or receivership, which is really what is being discussed, is to stabilize the finances and operations of the banks, this would require a completely transparent takeover of ownership and management and be completely invisible, at first, in the operations of the bank. The visible changes would be a drastic increase in lending activity.
    As a personal example of how this would work, when my own bank, Washington Mutual, was taken over by another bank, there was no way I could have known judging from my banking experience, the checks went through, my ATM card worked the very same day. Anything that would cause doubts about uninterrupted access to funds would be absolutely counterproductive.
    It’s not account holders who will lose in such a situation, but the owners of the bank’s stock, and we had better hope, management.
    For another real world example, one on a large scale, look into the solution to the Swedish banking crisis and the solution found in temporary government ownership. Krugman has written about this.
    The right wing is having a field day of propaganda by spreading fear of “nationalization” when this may well be the only way of providing the necessary funds and stability.
    With many thanks for all of your good work,
    Tom

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  5. bob h says:

    “I just withdrew some cash from Citibank and plopped it into my credit union account. I’m under the FDIC insurance limits, but still, do I really want a lot of assets caught up in a bank about to be nationalized?”
    I can see putting money into your credit union because it is a more socially responsible organization (I think we should boycott all malefactor institutions), but your actions basically were mindless panic. In all FDIC takeovers, it has been business as usual for customers immediately.
    If enough people react to the nationalization rumors in the mindless way you did, failure becomes a self-fulfilling prophecy.

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  6. TonyForesta says:

    Can no one do simple math? The banks are insolvent. Thier liabilities far exceed thier working capital. The socalled toxic assets that the banks want valued at 80 cents on the dollar, are were less than 20 cents on the dollar in the open market.
    The banks and the entire financial system is dead and rotting. The only question now, is who suffers the brunt of this massive unwinding. The numbers are imponderable, and comparisons with the “great depression” are off base, not because of the many similarities in the fundamental economics, – but in the extreme rapidity, rapaciousness, and monsterous debt and deleveraging that defines that define this economic crisis in far more dire terms.
    Soros said today that “…the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.
    Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union.”
    The problems is this news has not sunk into the greedy, supremist, criminal, deceptive predator class thick heads. The predator class must pay, and pay dearly for thier financial malfeasance, perfidy, criminal behavior, and collusion.
    Though the predator class, the superrich are working like banshee’s to heap all the imponderable debt and monsterous costs firmly on the backs of the American taxpayer and their children, who are already on the mat, – the only mathmatical way out of this crisis is in nationalizing FAILED banks and financial institutions, eliminating FAILED management, (preferably with a noose), and replacing FAILED economic models. Bond holders and shareholders will will be wiped out, left with the market mark of 20cents on the dollar or worse. The government takes over banking and the credit markets for a period of time, until a new more equitable, more legal, more mathmatically sound, more forcefully regulated, more moral financial system is erected.
    The government tossing trillions of taxpayer dollars at the predator class and FAILED banks, FAILED management, and FAILED models is certain to intensify, prolong, and perhaps rendering irreparable the current economic crisis.
    The great deppression will have been a cakewalk by comparison.
    Masters of the universe cannot perform simple math.

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  7. Tosk59 says:

    SC said, “… do I really want a lot of assets caught up in a bank about to be nationalized?”
    Rather a stupid statement… So, he feels safe because his balance is below the FDIC limit (i.e. govt guaranteed) but apparently worried about the *same government* taking over the bank??

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  8. Sam says:

    Steve, the real question is why is the White House is still denying that banks will have to be nationalized?
    http://online.wsj.com/article/SB123515866806935383.html?mod=rss_whats_news_us

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  9. WigWag says:

    Nationalize failing banks? I’m all for it. It do think Steve Clemons is being a little unfair comparing Citibank with Bank of America.
    Bank of America was solvent and was considered to be one of the healthier banks; its difficulties stem almost entirely from its purchase of Merrill Lynch.
    Merrill is being eviscerated (and investigated by Andrew Cuomo) not only for the outrageous bonuses Merrill Lynch paid right before the merger took effect, but also for whether they defrauded Bank of America before the sale was completed. If Bank of America is to be believed, they were taken by surprise by Merrill’s $15 billion loss in the 4th quarter of 2008.
    I’m not defending Bank of America and I’d be willing to bet that they face a shareholder derivative suit over the Merrill purchase. But fair is fair; Ben Bernake and Hank Paulson practically begged Ken Lewis to buy Merrill Lynch. This makes the United States government an accomplice in any difficulties Bank of America is facing. Citibank, on the other hand, has no one to blame but itself.
    Another example of the government’s complicity is the fact that Sheila Bair at the FDIC did everything she could to get the failing Wachovia taken over by Citibank. She brokered a marriage between Wachovia and Citibank and when Wells Fargo came in with a better offer, Bair did everything she could to sabotage it. Thank goodness she failed. Had she succeeded the failure of Citibank would have been even worse; the remnants of Wachovia would have gone right along with it.

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  10. sdemetri says:

    I’ll let others judge the wisdom of Dodd’s announcement, but not a
    few folks are saying one of the issues with the major banks is in
    their denial of their true positions… they are more insolvent than
    they are willing to admit. Taking control of them temporarily, in a
    manner predicated on the S&L crisis, may be the medicine needed
    to mitigate the toxicity of their holdings.

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  11. JohnH says:

    Hmm—As a favor, China could buy Citigroup for a paltry $11B, kind of like the favor we did Mexico by selling off all their banks after their financial crisis. If ever there was a symbol of how low America(TM) has sunk, this is it. But then, who would Rubin rip off?

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  12. erichwwk says:

    BTW, we ALREADY have de facto nationalization of the major banks. The problem now is that the old managers, who instigated the fraud and moved money out the back door into their personal accounts, still have control of the wheelbarrows and the back door. And believe themselves authorized to change the ownership of houses, from those who produce real value, to those that essentially are skimming. The jailing of petty criminals makes us the most oppressive nation on earth, measure by incarceration rates, while those that commit sufficiently major crimes are too big to jail.
    NY is the financial center of the US, and along with the major oil and military corporations, essentially ARE the government of the US, especially in the Senate. C. Schumer likewise knows how his bread is buttered.
    Chicago, and thus Illinois, can be seen as the real market counterpart. It is, however, easier to move the title of an asset to one’s personal account than it is to move the actual physical product.
    Who amongst us REALLY knows the quantity of US dollars outstanding, and thus what a dollar is worth tomorrow, much less what it will be worth at a distant future date?
    Ownership accrues to those most able to create phantom wealth by finding property right loopholes, rather than to those that actually create real wealth by transformation of something real into something better.
    “The louder they spoke of their honor, the faster we counted our spoons” — Ralph Waldo Emerson

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  13. erichwwk says:

    When the problem is undefined property rights, the worst thing one can do is feed the vagueness.
    Along that line check out today’s D. Brooks oped at the NYT.
    Seems really to support the JKG assertion that the role of the modern conservative is to justify selfishness.
    David lends his weight to the idea that sometimes we must abet the criminals to help ourselves.
    Reminds me of Neil Bush back in the days when he declared bankruptcy on his Colorado condominiums. When the smoke cleared, and the mirrors had been adjusted properly, it was determined that he now owned the condos free and clear.
    Nice work if you can get it.

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