Politicizing Banks Would be a Step in the Wrong Direction (Rep. J. Gresham Barrett)

While it is hard to speculate on the particulars of bank nationalization, there are few things more frightening to me than the prospect of the government running our banks or allowing politicians to directly or even indirectly dictate the day-to-day business decisions of private financial institutions. Politicizing banks and other financial entities would not serve the best interests of hard-working American families for a variety of reasons; namely government has shown a unique ability to mismanage money and politicians could potentially determine the recipients and terms of loans with little or no regard for financial factors and qualifications.

The fact is government has a horrendous track record of managing finances. One need look no further than the so-called stimulus package that was hastily passed into law last week for proof of that fact.

As if that wasn’t proof enough, do we really need to be reminded that at the center of our economic crisis lay two quasi-governmental financial monsters with incompatible, politically-motivated missions: Freddie Mac and Fannie Mae. The mismanagement at these two firms shook our struggling economy to its core, and the aftershocks are still being felt
today. Just last week, the administration announced that it would be doubling the taxpayers’ pledge to back Fannie and Freddie in order to ease the impact of their bad decisions.

A particularly troubling possibility that could accompany a bank nationalization plan is that politicians would potentially have a large say in who receives loans and for how much. Unfortunately, politicians haven’t shown a propensity for purity of motives. Certain companies, or individuals for that matter, might be given favor depending on their political leanings.

Government certainly has a role to play in restoring our country’s financial footing, but any action we take must be temporary and targeted towards getting the private sector working again. Politicizing banks would be a step in the wrong direction.