Though the Obama administration continues to deny it, the U.S. government continues to move closer to nationalizing the nation’s largest banks. The last week of February the Federal Reserve and the Treasury Department both announced that the federal government may convert the shares of preferred stock it already owns in Citigroup and other banks into common shares, thereby acquiring voting rights and a greater measure of outright control over the institutions.
“President Barack Obama threw a $75 billion lifeline to millions of Americans on the brink of foreclosure,” the Associated Press reported after the president’s February 18 speech in Phoenix, Arizona, where he unveiled his solution to the mortgage crisis. But the “lifeline” Obama threw comes at a cost, since the government does not create wealth (though it does create money via the Federal Reserve), and the $75 billion that will be spent to “rescue” beleaguered homeowners will have to come from the American economy.
General Motors and Chrysler submitted “financial viability” plans to the U.S. Treasury on February 17 that included combined requests for another $18.6 billion in federal bailout funds — $16.6 billion for GM and $5 billion for Chrysler.
Will the banks be nationalized? That question would have seemed preposterous prior to the $700 billion Troubled Asset Relief Program to bailout major financial institutions. But with the TARP money comes federal control, and that control could be strengthened to the point of full-blown nationalization, particularly if the already congressionally authorized $700 billion is deemed insufficient to “rescue” the banks.
Oil prices dropped from $141 per barrel to below $40, but experts say that this decline is going to end in 2009, according to 24/7 Wall Street. When oil prices tumbled, OPEC made an attempt to reduce production, calling on OPEC nations to produce less, but its efforts were largely unsuccessful because, it is speculated, some OPEC nations bucked the cartel and kept production high, maintaining falling prices. About the only thing that kept the prices at U.S. pumps from falling even lower than they did is that some California refineries shut down for routine yearly maintenance.