President Obama reiterated Tuesday that he does not support the nationalization of the country's largest banking companies.
In a speech at Georgetown University, Obama said he is not philosophically opposed to nationalization, but he is concerned that government takeovers would be too costly.
"The reason we have not taken this step has nothing to do with any ideological or political judgment we've made about government involvement in banks, and it's certainly not because of any concern we have for the management and shareholders whose actions have helped cause this mess," he said. "Rather, it is because we believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end, and because it is more likely to undermine than to create confidence. Governments should practice the same principle as doctors: First do no harm."
During the speech, Obama defended his administration's economic policy, including its capital injections into banking companies and a plan to purchase toxic assets. He also called for the creation of government resolution authority for all systemically important institutions. The administration has submitted a proposal to give the Federal Deposit Insurance Corp. such authority.
House Financial Services Committee Chairman Barney Frank is expected to introduce a bill to grant such authority when Congress returns from recess next week.
