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We Done All Lost Our Minds!

By Mark Thompson

Last night, I mentioned to my wife that I thought nationalizatin of the banking industry, at least in the near term, was "highly unlikely." I was wrong. Very, very wrong.

What most disturbs me about this is that, after the last 8 years of warrantless wiretapping and various other abuses of government power through proxy corporations and private enterprises (Blackwater, anyone?), it is many liberals and progressives most loudly supportive of this move (notably, I do not at this moment believe Obama has expressed support for it, and I have noticed several prominent lefty bloggers who appear openly skeptical of it).

Liberals/Progressives ought to rethink their support of nationalizing the banking industry. If we are talking only short-term nationalization, then so be it, as long as there is a clear date by which government dumps its ownership (not that I support even short-term nationalization; I just don't think it would be completely disastrous). But if we are talking about something more long-term, then this creates a severe potential for true corporatism/fascism.

To demonstrate, I simply point out how the warrantless wiretapping program began - the administration approached the phone companies about instituting the program. Those who agreed to do so were rewarded; those who didn't, not so much. Now imagine the danger created when government decides which businesses do and do not get credit, which is so often a necessary requirement for business growth and survival, both large and small. Isn't it rather easy to imagine large corporations getting loans conditioned on their willingness to go along with the ruling administration's "Policy X"? Nationalization of the banking industry, in this sense, allows the ruling administration to do an end run around the Constitution by getting corporations and business to "voluntarily" do things on behalf of the government that the government would otherwise be prohibited from doing itself.

At a minimum, long term nationalization of the banking industry creates a situation that is rife for corruption. Take a look at some of what occurred in South (yes, South) Korea in the 1980s, where, IIRC, only one of the 30 largest corporations refused to play along with the ruling party's demands (for bribes, kickbacks, and IIRC compliance with party policy preferences). That one corporation suddenly found, amongst other things, that it was no longer able to obtain credit.

Perhaps a President Obama would be rather benevolent in his use of these powers afforded by nationalization, and maybe he would try to ensure that his underlings were in fact fair and neutral in making determinations on the issuance of credit. Problem is that: 1. there is no guarantee he will win, 2. we have no idea who will be in power 4 or 8 years from now, and 3. even the most benevolent of leaders will be tempted to use this tremendous power as a way of serving his concept of the "greater good" under the view that the ends justify the means.

Indeed, point 3 is precisely what has been the problem the last 8 years. While I think the Bushies have dramatically overstated the threats we face to national security, I also don't doubt that they believe those threats are real and severe. And therein lies the rub - because they view the "greater good" of national security as so important, however honestly, almost anything done in service of that "greater good" can be justified.

Admittedly, the details of the takeover plan have not been announced yet, and it does not appear that the government will be taking a controlling interest in the banks (as the Fed did with AIG). If the details contain a plan to divest the government of whatever interest it takes in the banks over a period of time (and that plan is complied with) and it does not exercise control over day-to-day decisions on issuance of credit, then perhaps there is not much to worry about. But if the details are otherwise....well, Switzerland is looking better by the day.

Mark blogs regularly at Publius Endures