in 1938, the Bank of Canada became publicly owned and remains that way today

     One of the first rules of crisis is don’t panic, unfortunately that is what the almost trillion dollar bail out looks like. It’s like a military leader fearing an ambush and at the first sound starts shooting at nothing. Now while this might buy some time, it weakens the strength to fight when the enemy does make itself known, furthermore it does the foot soldiers no service to see their leader react without a plan or understanding what the plan is. One of the problems that has been repeated ad nauseam is that we need to restore liquidity. Perhaps a better idea would be to sit down, have a glass of water, take a deep breath, and try to think clearly here. Another concept worth repeating if what you have always done got you into trouble, maybe trying something else might be better.  

The problem is that Banks fear lending to one another because many of them hold bad debt and there is uncertainty on the part of the Lender. The Government proposes to buy up this bad debt and to even invest in the banks themselves. This solution sounds grand, but it will not force the banks to resume lending money, in fact it rewards banks if they seem to be failing and in no way assures a banking policy commensurate with restoring global economic well being.  

What other countries have found to be useful when facing this kind of crisis in the past, is to create an entirely new bank free of bad debt, and an initial capitalization of a trillion dollars would certainly go a long way to solving the financial crisis, this new Bank would now lend money to the “main street” banks and perhaps even approved Banks that invest in larger ventures. This Bank might even become directly involved in large Public Investments like infrastructure or new energy initiatives. This new bank could be called something like “The Bank of America” and its function would be to maintain stability. It would underwrite bad debt but not hand out tax money without some kind of assurance that the money would be used in the best interest of the economy and of the nation.  

This concept works in Canada, in 1938, the Bank of Canada became publicly owned and remains that way today. The Liberal party had a commanding majority at that time with W. L. Mackenzie King as leader and Prime Minister. It took action for the nationalization of the Bank of Canada, adopted a low-cost housing bill, a youth-training program, a war veterans bill and set up a Transportation Board with authority over rail air and water travel. The Liberals also offered assistance to Labour unions which had the effect of calming worker fears and restored confidence in the foundation of the economy.

This is the kind of action that needs to be taken in the U.S. to stabilize the system, and until that action is taken the U.S. economy will remain troubled and will not restore the confidence needed to reassure other Banks and the Public that the base of the  economic system is sound. In Canada the public ownership model has worked very well and there is growing consensus that the excessive privatization schemes of neo conservative fiscal policy often inflicts a great deal of harm upon the countries its policies are forced upon. America’s bailout is not a cost effective way to spend monies appropriated from the real economy, further it will weaken its ability to respond in meaningful ways in the future.  

Much of the media in America seems unwilling to provide the public with the information needed to look at this problem from a broader perspective. The public in America feels like they are being robbed, they are told over and over by the experts or “Mr. Independent” that they need to do this. Maybe the public is not educated in the ways of sophisticated economic policy, but they are smart enough to see what is going on. This bail outs looks like a shake down of “Joe six pack” for the benefit of private banking interests. The Public is being robbed of decades of tax revenue that will be sorely needed in the future to  deal the realities of a changing world. It is time to concede that some parts of the economy are just too important to be left to “enlightened self interest” – which is just a fancypants sophisticated economic policy term, commonly known as Greed.  

Daeran Gall  
Daeran is a freelance writer, community activist and web designer and studied economics at the University of Regina daerangall@gmail.com