Much has been made about how the nine largest banks were coerced into accepting the federal equity purchase, but it appears that regulators will also decide which of the smaller banks are unduly suffering and must accept government ownership:
Federal regulators said they did expect some banks to volunteer, though none stepped forward yesterday. But they added that they would not rely on volunteers. Treasury will set standards for deciding which banks can be helped, and the regulatory agencies will triage the banks they oversee: The institutions faring best and worst will not receive investments. The institutions in the middle, whose fortunes could be improved by putting a little more money in the bank, will be pushed to accept the money from the government.
I can't even begin to describe the problems this is going to create down the road. The Treasury and the Federal Reserve are floundering: taking action where none is warranted, overreaching their Constitutional bounds, and moving the center of American finance from New York City to Washington. All on the pretext of averting another Great Depression, even though almost nothing outside of the stock market points to a general economic slowdown. Unemployment is up, but that could still be the lingering effects of a market adjusting to the minimum wage increase. Retail sales are down, but uncertain times lead people to hold back on purchases.
I sincerely believe that the next president will usher in an era of malaise and bad times, no matter which candidate wins. We may in fact be in for another Great Depression since, like the first one, government intervention will deepen and prolong any downturn.
[UPDATE (10/23/2008): I was most disappointed to hear that John Kovacevich, CEO of Wells Fargo, folded but I'm not surprised. Even Henry Rearden signed away Rearden Metal. The parallels between today's political environment and Atlas Shrugged are many and distressing.]