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The Dow Jones Industrial Average fell to 7465, "its lowest point since this crisis began," as ABC's David Muir put it, falling almost 10% since Secretary Timothy Geithner announced the Treasury Department's plan for the second part of the TARP bailout. "Many investors are worried about the so-called banking stress tests," Muir explained. "Once the government opens those books we could be in for a rude awakening." Shares of Bank of America have fallen from $42 to $4 in the past year; those of Citigroup from $25 to $2.50, "its lowest value now in history."
CBS anchor Katie Couric took the plunge and tried a What It Means explainer about the potential for nationalization of "the biggest banks in the most trouble." Her effort, to coin a Treasury phrase, just did not pass the stress test.
Couric used a key soundbite from Chairman Benjamin Bernanke of the Federal Reserve Board about the "very strong commitment" of the Obama Administration to return banks "to private hands as quickly as possible." There is no doubt that this is a reference to Swedish-style nationalization, a method whereby banks are allowed to fail; their assets fall into government hands; their loss-making paper stays on the government's books; their profit-making operations are resold to private capital. Instead, Couric characterized any nationalization as involving a "government bureaucracy" that "may not offer the best customer service."
Couric mentioned FDR's New Deal and Japanese zombie banks and nationalized banks in Britain but did not even refer to the Swedish model. And she contradicted her own assertion that nationalization would apply only to the biggest banks when she claimed that the Treasury Department had decided not to nationalize Citigroup and Bank of America but "prop them up with government funds until the economy recovery." Time will tell.
UPDATE: Brent Baker, our conservative news monitoring colleague at Newsbusters.org agrees with Couric that any nationalization would not follow the Swedish model but would involve bureaucrats offering customer service. It is a rare day when Baker publicizes his agreement with Couric--even though his endorsement was a sarcastic one. He called Couric's customer service line an "understatement."
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