A little off topic...A summary of the Bank Nationalization.

It had to be done.  Europe forced our hand.  Britain, Spain, France, and Germany injected capital into their banks and brought them back from the brink of disaster.  There was nothing else to be done.  We had to follow their example.  And so for the first time since the 1930's we now have partial bank nationalization.  Our government offered an "optional" deal to the nine leading banks, and then told them they had to sign. Now the government partially owns those banks.  And they expect a reasonable return.  The price tag for the capital injection is $250 billion, with about half going to the big nine, and the rest going to smaller banks.  The $250 billion comes from the $700 billion bailout bill signed into law on Friday, October 3, 2008.

The global markets initially responded positively, but enthusiasm leveled as the day progressed.  Positive market reaction, however, was not the intended goal.  The goal is to thaw the credit freeze and reopen lending between banks and customers.  So far, there has been only minimal progress.

 

Both presidential candidates in the end said they agreed with the program.  Presidential candidate Barack Obama has expressed approval of the program from its inception.  McCain initially withheld judgement, and has since offered a lukewarm reaction, essentially stating that it needed to be done because of the extreme circumstances, but that it needs to be reversed as soon as possible.

Reaction from financial experts is mixed. They wonder if the government overstepping its bounds.  The future will tell.  If the government works quickly to get out of the banks as soon as conditions are stabilized, it will most likely be viewed as a success.  On the other hand if the government stays in the banks, free-market fans will wonder if the market would have corrected itself if the government had not intervened?  We won't ever know the answer to that question.  The conditions we were facing were unprecedented.  The risk of letting the free-market ideology play itself out was judged to be too great.  It had to be done.  

Although what goes on in the banking industry may seem unrelated to energy, the fact is they are intertwined.  Tonight, during the last presidential debate, it appears that the candidates will finally be addressing how the current financial crisis may affect the costly programs they have both proposed.  The investment into alternative energy will no doubt be one of the items that may be on the chopping block.  I suspect that neither candidate will be willing to admit exactly where they will make cuts, but maybe they'll surprise me.

****UPDATE OCTOBER 27, 2008****

It's been two weeks since the move to inject capital into the banks, which is not a lot of time, but I thought I'd check in and see how things are progressing.  The main goal was to thaw the credit freeze, and as of today it looks like there has been some improvement, but not much. Since the partial bank nationalization, governments and banks of leading nations have been 

scrambling to find additional solutions to the financial meltdown. Today, the Federal Reserve began a program aimed at improving the lending markets used by banks and big businesses. Global markets are still volatile, and opened down this morning.