One aspect of forming a national bank is that it will help current bondholders of banks.  In a nationalisation scenario, illiquid hard-to-price assets will be moved off the bank balance sheet and warehoused, or quarantined.  In effect, this takes these assets off the market and allows for time and improving economies to regain their value.   Even if Treasury takes over only one major bank and quarantines that bank’s illiquid asset, it will help support the value of similar assets held at other banks.

Under any other scenario, insolvent or sketchy banks might be forced to sell some of these assets at fire sale prices.  Only the government can pull these assets off the market and put a sign on them “Not For Sale.”  One can’t help wonder if some of these “don’t nationalise” protestors are hiding their real intention–have the government force troubled banks to sell assets cheap so others can swoop in and make a killing.

Because the government can cheaply quarantine these securities and hold them until their market value returns to some form of reality (not the situation today), bondholders are better protected.  Income from these quarantined assets can be used to meet bondholder interest payments, and once they are sold, their increased value may allow for principal return in full.  Any forced fire sale makes that impossible.

Allowing banks to value these assets on accrual value or even fair value, as opposed to the current accounting fiction called “mark to market,” would be a major stabilizer for all banks.  But so far no one seems to want to make this common sense move.

Today’s stock market drop pulled every bank down, with Citi and BofA being priced now at bankruptcy prices.  Almost all of these shares are now in the hands of speculators.  Investment owners have long since left the playing field.  It got so bad, Treasury had to put out a statement that it intends to keep banks in private hands.  Not a good idea if this forces a fire sale of bank assets.

If Treasury does not nationalise, then it must remove these illiquid assets from many large banks in order to protect bondholders in particular.  However, after the trillion or so in taxpayer subsidy already, Congress is unlikely to allow more money be spent to “buy” these assets upfront, which seems to be the idea of a bad bank.  All that rope has been used up.

The cleanest way is through nationalisation and quarantine of illiquid assets.

Where in the world did we get the idea that the rich got their money all by themselves?  The very concept is ridiculous and false on its face.  Everything is made by many people, most of whom are not wealthy.

Yet when we tax, we tax the middle class and give the wealthy tax breaks.  We give the nation’s financial instruments special tax breaks so they can, in turn, benefit the wealthy.  And when the big financial tools of the wealthy falter because of their greed, we pour trillions into their balance sheets.  Trillions taken from the middle class, from labor, and their children.  A perverted Socialism that supports the rich.  If we’re going to provide socialism, we should provide it for whom it was intended, the non-wealthy. 

This is madness.  Wealth has effectively neutered the votes of the middle and working class for years.  Even after the election of Barack Obama, wealth’s powerful tools of influence remain embedded in Washington.

Despite the obvious need for universal health care, the wealthy fight against it and willingly tolerate the cruelty of exposing 40 million citizens to the vagaries of health.  And why not?  Wealth can afford expensive health care, and many fortunes have been made through private health insurance companies that cater to the wealthy and decline coverage for the poor or the ill.

Wealth has its banking infrastructure and the government support through the Federal Reserve, Treasury and, so far, Congress.  Most of this support network paid for by middle class taxes.  How about the people get their own bank for a change?  A national bank that has the nation in mind, not just the wealthy.  A bank that will lend to Main Street when times are tough, not just to Wall Street.

How about building some protection for labor and the middle class instead of taxing labor and the middle class to build protection for the rich. 

President Obama understands this, but he must deal with the legacy created by decades of socialism for the wealthy.  It will take time to redress this longstanding injustice. 

Despite the formidable power of the wealthy and those who defend them, Obama has two dominantly powerful tools the rich cannot take from him:  His personal charisma and talent for communication; And the Executive Power he was given by the nation when they elevated him to the Presidency.   

He needs to remind Americans that the democratic ideal is to lift all incomes, not to just add to rich bank accounts.  And that’s just exactly what he is going to do.