Perhaps the most shocking news from the previous week came in a series of stories and rumors that the U.S. government may move to nationalize some banks in an attempt to address the ongoing global economic crisis. In an interview on Tuesday, former Federal Reserve Chairman (and ardent free marketeer) commented that, “It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring.” In the same story, Republican Senator Lindsey Graham concurred, noting, “If nationalization is what works, then we should do it.” Speculation that Citibank and Bank of America may be the first banks to be nationalized drove their stock values down and led to both dramatic selloffs on Wall Street and a sharp increase in the price of gold, normally used to hedge against uncertainty. The events forced the Obama administration to attempt to reassure global markets, as White House Press Secretary Robert Ribbs said, “This administration continues to strongly believe that a privately held banking system is the correct way to go, ensuring that they are regulated sufficiently by this government. That’s been our belief for quite some time, and we continue to believe that.” Remember when the Democrats were the ones who wanted greater government control over the economy, and Republicans opposed such intervention? Seems the global financial crisis makes the conventional wisdom less and less relevant.
Here are five stories from the previous week you might have missed if you’ve been trying to keep the players in the nationalization debate straight:
1. On Friday, the government of Mexico confirmed the country was following the general trend in much of the rest of the world, heading into recession. In the final quarter of 2008, the Mexican economy contracted by 1.6 percent. In an attempt to stimulate the economy, the government cut interest rates. But close ties to the ailing U.S. economy have acted as a drag on the Mexican economy, undermining the ability of the Mexican government to develop an effective stimulus program.
2. The United Nations-backed naval taskforce in the Gulf of Aden appears to have been generally successful in addressing the problem of piracy in the region. A number of U.S. and E.U. naval vessels, as well as ships from several other navies, have been operating off the coast of Somalia in an attempt to curtail the piracy which had become endemic to the region. The government of Somalia remains unable to assert control over its territorial waters, and piracy was one of the few ways in which Somalis were able to earn a living.
3. The government of Pakistan and Taliban fighters in the northwestern part of the country agreed to a “permanent ceasefire” on Saturday. In exchange for agreeing to the ceasefire, the Pakistani government has offered to reinstate Islamic sharia law in the region. Many observers are concerned that the ceasefire may create a safe haven in Pakistan for Taliban and al Qaeda fighters could regroup.
4. Latvia’s Prime Minister, Ivars Godmanis, became the second victim of the global financial crisis on Friday, as he was forced to resign from office amid widespread popular protest. Like the government of Iceland before it, the Latvian government had been forced by the global economic downturn to launch a series of austerity measures imposed by the International Monetary Fund. A number of other countries in Central and Eastern Europe, including Hungary and Ukraine, have already implemented structural adjustment programs. Several others, including Serbia, Romania, Lithuania, and Estonia, are also seen as vulnerable.
5. The conflict in Sri Lanka continues. After the government had made significant advances into rebel territory over the past several weeks, Tamil Tiger rebels responded on Friday night with a surprise air raid on the Sri Lankan capital, Colombo. Initial reports indicated that at least 42 people were injured in the attack. An estimated 70,000 people have been killed since the civil war began in 1983.