Yes America, we pulled a Chavez...

So the federal government effectively nationalized the largest insurance company in the country. Oh wait, not the federal government... the federal reserve board... you know, that thing that operates independently of our elected officials, save the occassional appointment of a chairman.

I don't know if this is as scary or shocking as it sounds - but it does make me wonder. To quote the senior Senator from New York: "The administration is approaching an unprecedented step, but unfortunately we are living in unprecedented times".

I don't like unprecedented times... there's just not precedent for them!

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Representative Barney Frank (D - MA) is proposing the creation of a new federal agency to buy bad debt and reorganize companies as a long-term solution to the crisis. This article notes that a similar action was taken during the S&L crisis of the 1980s, but the that goal there was much simpler - limit taxpayer liability. The government was on the hook to insure those deposits.

No such clear cut goal exists in this case - it's not clear whether Frank's agency would be charged with lowering taxpayer liability (i.e. - probably selling off our newly nationalized companies as quickly as possible so that we're not left holding the bag there), protecting large financial institutions, or protecting homeowners.

On the deposit insurance front - it looks like all this could expand beyond the investment banking industry. The same article I linked to above suggests that Washington Mutual may be in trouble - and that if the government were to bail them out (which they are obligated to do because it's a deposit institution), then it could deplete half of the FDIC fund.