I’m not certain whether I approve of Secretary Paulson’s proposal to create an RTC-like entity to buy up bad debt. Perhaps the situation is dire enough to require such an action, but it’s deeply troubling. On the other hand, it’s easy to oppose Charles Schumer’s alternate proposal:
Schumer presented his own proposal for federal intervention, in which the government would lend struggling banks money in exchange for an equity stake. He said it would be conditioned on the banks agreeing to legislation that would let homeowners who have declared bankruptcy renegotiate their mortgages so they could keep their homes.
“An equity stake” means ownership. Schumer wants the government to take ownership of the banking system. To be sure, this is only partial ownership, but once the government has its foot in the door, it won’t be leaving. This is nothing less than a proposal to begin nationalizing the banking system.
At least we shouldn’t have to deal with any bogus arguments that the Federal government will be a silent partner in banking. Schumer’s condition makes it clear that the government will be running the show from the get-go.
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