The Herman Cain Oppo

Weigel
Reporting on Politics and Policy.
May 6 2011 2:54 PM

The Herman Cain Oppo

It begins! Today, I have been pointed once again to a column Cain wrote right as TARP was passing through Congress. It wasn't a highly-read column at the time, insofar as Cain's not really competing for Kathleen Parker for syndication. It will be highly read if he keeps dominating Twitter and Google searches.

Wake up people! Owning a part of the major banks in America is not a bad thing. We could make a profit while solving a problem.  

But the mainstream media and the free market purists want you to believe that this is the end of capitalism as we know it. It is not for several reasons that they have conveniently not explained.  

First, instead of buying toxic mortgage-related assets of banks as originally proposed, the Treasury has changed tactics and will buy equity positions called preferred stocks, which gives us as taxpayers an ownership stake in their success for a limited period of time.

Preferred stock means we get paid a dividend before any other stockholders get paid a dividend when they make a profit. You got a problem with that?  

Second, the purchase agreement between the Treasury and the participating banks has an incentive for the banks to re-purchase the stock back from the Treasury within five years.

If the banks do not re-purchase the stock in five years then we get a bigger dividend until they do re-purchase the stock. That’s a good deal!

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Is TARP socialism? Glad you asked.

The free market purists’ objection to this is that it smacks at government control of the banking industry, which is called nationalization. They are correct. It smacks, but it is not nationalization because that would require the government to own at least 51 percent of the entity for an indefinite period of time.

The ownership by the taxpayers is going to be relatively small and nowhere near the amount needed to be called nationalization. So what’s the problem?

This is pretty reasonable, as if that will save him.

David Weigel is a reporter for Bloomberg Politics

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