These are hard times. Stocks are down, debts are up. On October 14 the US government did something about it. The treasury plans to pump $250 of the $700 billion rescue plan into national banks. This money is given in return of stock purchases from each bank. The first half of the money will go into nine large banks. Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp. and Morgan Stanley are included. The money is to be given in three year securities. The banks can pay it back when the economy is stronger. Secretary Henry Paulson told the banks that they must take the money. It's all for the good of the economy. The FDIC also plans to provide insurance for loans made between banks. This will encourage more bank to bank lending.
The United States is copying Europe. Britain stepped it up last week. It made claim to take equity stakes in its banks. France, Italy, and Spain followed suit. This is a step forward for the economy. However, many conservatives are scared. They believe in little government interference. Could nationalization be a step toward socialism? They need to peer back in history. In 1932, bank stocks were bought by the Reconstruction Finance Corporation. The plan worked. Gradually. It has the potential to work again.