While the federal government has taken great pains to avoid acquiring controlling shares of banks as it seeks to rescue them (and while the looming debate over "nationalization" has made bank rescues politically charged), the AFL-CIO is calling on the government to cross the threshold. In a resolution passed today by the federation's executive council at its annual meeting in Miami, the AFL-CIO formally urged the Obama administration to acquire controlling shares in order to force banks to reform their practices.
The resolution reads:
The AFL-CIO calls on the Obama administration to get fair value for any more public money put into the banks. In the case of distressed banks, this means the government will end up with a controlling share of common stock. The government should use that stake to force a cleanup of the banks' balance sheets. 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. We believe the debate over nationalization is delaying the inevitable bank restructuring, which is something our economy cannot afford.
Many have hesitated to call for such a plan--last week, House Majority Leader Steny Hoyer (D-MD) specifically said no one in the House of Representatives, in his estimation, is proposing that the government "nationalize" banks--and, while there's still a question of whether "nationalize" always applies to acquiring controlling shares for a time, the risk of being associated with socialism looms. (Republican Sen. Lindsey Graham, it should be noted, was far less bashful about calling for the idea.) Now the AFL-CIO has joined the ranks of Paul Krugman and Alan Greenspan in saying, definitively, it's the way to go.