President Obama showed his hand this week when The New York Times wrote that he is considering converting the stock the government owns in our country's banks from preferred stock, which it now holds, to common stock.
This seemingly insignificant change is momentous. It means that the federal government will control all of the major banks and financial institutions in the nation. It means socialism.
The Times dutifully dressed up the Obama plan as a way to avoid asking Congress for more money for failing banks. But the implications of the proposal are obvious to anyone who cares to look.
When the TARP intervention was first outlined by the Bush administration, it did not call for any transfer of stock, of any sort, to the government. The Democrats demanded, as a price for their support, that the taxpayers "get something back" for the money they were lending to the banks. House Republicans, wise to what was going on, rejected the administration proposal and sought, instead, to provide insurance to banks rather than outright cash. Their plan would, of course, not involve any transfer of stock. But Sen. John McCain undercut his own party's conservatives and went along with the Democratic plan, assuring its passage.
But to avoid the issue of a potential for government control of the banks, everybody agreed that the stock the feds would take back in return for their money would be preferred stock, not common stock. "Preferred" means that these stockholders get the first crack at dividends, but only common stockholders can actually vote on company management or policy. Now, by changing this fundamental element of the TARP plan, Obama will give Washington a voting majority among the common stockholders of these banks and other financial institutions. The almost 500 companies receiving TARP money will be, in effect, run by Washington.
And whoever controls the banks controls the credit and, therefore, the economy. That's called socialism.
Obama is dressing up the idea of the switch to common stock by noting that the conversion would provide the banks with capital they could use without a further taxpayer appropriation. While this is true, it flies in the face of the fact that an increasing number of big banks and brokerage houses are clamoring to give back the TARP money.