New York Times
March 4, 2009
A.F.L.-C.I.O. to Support Nationalizing Banks
By
<http://topics.nytimes.com/top/reference/timestopics/people/g/steven_greenhouse/index.html?inline=nyt-per>STEVEN
GREENHOUSE
MIAMI BEACH The
<http://topics.nytimes.com/top/reference/timestopics/organizations/a/american_federation_of_laborcongress_of_industrial_organizations/index.html?inline=nyt-org>A.F.L.-C.I.O.s
executive council will call on the Obama
administration on Wednesday to speed the
<http://topics.nytimes.com/top/reference/timestopics/subjects/n/nationalization_of_industry/banks/index.html?inline=nyt-classifier>nationalization
of problem banks to stimulate lending and lift the sagging economy.
The labor federation, a lobbying powerhouse that
represents 10 million workers, will thus become
one of the first groups and certainly the most
powerful to call for moving more aggressively
on nationalization, both to counter Republican
and business cries against it and to press the
Obama administration not to vacillate over such a move.
A.F.L.-C.I.O. officials asserted that the
administrations practice of giving billions of
dollars in dribs and drabs to distressed banks
had failed to restore their solvency, leaving
them as zombie banks that largely refrain from
lending, thereby contributing to the economys decline.
The executive council is scheduled to approve a
statement that criticizes the Obama
administration for indulging shareholders of
distressed banks by not nationalizing the banks
to speed the cleanup of their balance sheets.
We believe the debate over nationalization is
delaying the inevitable bank restructuring, which
is something our economy cannot afford, a draft
of the councils statement said.
The labor leaders also asserted that the Obama
administration, like the Bush administration, had
failed to obtain fair value for the tens of
billions it had invested in distressed banks.
By feeding the banks public money in fits and
starts, and asking little or nothing in the way
of sacrifice, we are going down the path Japan
took in the 1990s a path that leads to zombie
banks and long-term economic stagnation, the draft statement said.
The statement makes clear that the group wants to
add its political and lobbying muscle to calls by
<http://topics.nytimes.com/top/reference/timestopics/people/s/joseph_e_stiglitz/index.html?inline=nyt-per>Joseph
E. Stiglitz, Nouriel Roubini and other economists in favor of nationalization.
Labor leaders said the administration appeared to
be vacillating on nationalization partly out of
fear of Republican attacks that it was adopting socialist policies.
Banking executives have spoken out against
nationalization, saying it would hurt
shareholders and insisting they can nurse their banks back to health.
Some Obama officials voice fears that it will be
hard to manage nationalized banks and that
nationalization could drive down the shares of
other financial institutions by generating fears
that additional banks will be taken over.
A.F.L.-C.I.O. leaders said they did not favor
long-term nationalization of banks, but rather
temporary trusteeships in which the government
would take a controlling stake in a bank, clean
up its balance sheet, then spin it off.
The result should be banks that can either be
turned over to bondholders in exchange for
bondholder concessions or sold back into the
public markets, the executive councils draft said.
<http://topics.nytimes.com/top/reference/timestopics/people/b/james_a_iii_baker/index.html?inline=nyt-per>James
A. Baker, the
<http://topics.nytimes.com/top/reference/timestopics/organizations/t/treasury_department/index.html?inline=nyt-org>Treasury
secretary under President
<http://topics.nytimes.com/top/reference/timestopics/people/r/ronald_wilson_reagan/index.html?inline=nyt-per>Ronald
Reagan, wrote in The Financial Times on Tuesday
that temporary nationalization might be necessary
to inject public funds into problem banks.
I abhor the idea of government ownership
either partial or full even if only temporary,
he wrote. Unfortunately, we may have no choice.
But we must be very careful. The government
should hold equity no longer than necessary to
restructure the banks, resume normal lending and
recoup at least a portion of taxpayer investment.
The labor leaders said that 43 percent of the
nations bank assets were held by four
institutions
<http://topics.nytimes.com/top/news/business/companies/citigroup_inc/index.html?inline=nyt-org>Citigroup,
<http://topics.nytimes.com/top/news/business/companies/bank_of_america_corporation/index.html?inline=nyt-org>Bank
of America,
<http://topics.nytimes.com/top/news/business/companies/wells_fargo_and_company/index.html?inline=nyt-org>Wells
Fargo and
<http://topics.nytimes.com/top/news/business/companies/morgan_j_p_chase_and_company/index.html?inline=nyt-org>JPMorgan
Chase. One A.F.L.-C.I.O. financial expert said
Citigroup and Bank of America were insolvent and
candidates for quick nationalization.
When these institutions are paralyzed, our whole
economy suffers, the labor statement said,
adding, However, government interventions must
be structured to protect the public interest, and
not merely rescue executives or wealthy investors.
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