US Bank Nationalizations: One Step Closer

Yesterday, Justin Fox detected a possibly important shift in emphasis from Hank Paulson.

Did anybody else notice that when Hank Paulson was describing in his press conference today what the Emergency Economic Stabilization Act enables Treasury to do, the first thing he listed was "to inject capital into financial institutions"? ...
Yesterday Ben Bernanke hinted that a change in emphasis might be in the offing for the TARP. And today Paulson seemed to confirm it. it.
None of the people asking questions at the press conference really seemed to pick up on this, of course (&%%$# Washington journalists!).

Now take a look, if you can, at the front page of today's NYT. On the web there's a huge headline saying "U.S. May Take Ownership Stake in Banks"; in the paper there's an even bigger double-decker, four-column, top-of-the-page, all-caps headline saying much the same thing.

The interesting thing is that on the face of it there's no news here, beyond a change in emphasis: the NYT could have run the same headline the day after the Tarp bill was passed. But clearly Treasury has been talking more to the NYT than to Justin: the paper talks about a Treasury plan (albeit a "preliminary" one) which "resembles one announced on Wednesday in Britain".

I'm glad that Treasury is making these noises, because the market clearly has no faith at all in Tarp as originally conceived. But most of all I'm glad that Congress insisted on giving Treasury the authority to buy equity as part of the bill. Barney Frank, it seems, has been proven more far-sighted than Hank Paulson.