Comments on: Nationalize Now

By: How the Common Man Sees It

How the Common Man Sees It — Tue, 27 Jan 2009 14:17:57 +0000

Let them go bankrupt and then let any company that wants to be a bank apply to be one. As long as they adhere to the rules of banking there will be banking, liquidity and competition galore. This, of course, would mess up the cabal and thus never would fly but it sure would speed the healing

By: Mannwich

Mannwich — Tue, 27 Jan 2009 02:50:20 +0000

@Jono: Oligarchy hasn’t exactly worked out well in today’s Russia, so let’s not copy that model either. Please refrain from the false choice you offer.

By: Mark A. Sadowski

Mark A. Sadowski — Tue, 27 Jan 2009 02:42:42 +0000

@Jono,
The real choice is between my spirit (and tax dollars) and the bank shareholder and bondholder’s spirit. They messed up so let them take their loss. It’s called capitalism. In the good years, they were rewarded for their risk taking. Ownership cannot be a one-sided bet. Otherwise its just corporate welfare.

By: Jono

Jono — Tue, 27 Jan 2009 02:25:58 +0000

Yeah. nationalization worked really well in the Soviet Union, lets see if we can wipe out the economy this year and crush its spirit.

By: Mark A. Sadowski

Mark A. Sadowski — Mon, 26 Jan 2009 23:24:04 +0000

Paul Krugman also favors nationalization:

“A better approach would be to do what the government did with zombie savings and loans at the end of the 1980s: it seized the defunct banks, cleaning out the shareholders. Then it transferred their bad assets to a special institution, the Resolution Trust Corporation; paid off enough of the banks’ debts to make them solvent; and sold the fixed-up banks to new owners.”

http://www.nytimes.com/2009/01/19/opinion/19krugman.html?_r=1

By: Mark A. Sadowski

Mark A. Sadowski — Mon, 26 Jan 2009 23:21:34 +0000

I’ve been dumbfounded by the number of seemingly intelligent people who are going into all sorts of intellectual contortions trying to come up with a solution to the credit crunch when nationalization is the obvious and most simple solution. First, either the taxpayer takes the entire hit or the bondholders and shareholders share the cost. Since making the taxpayer foot the entire bill results in a moral hazard problem, I say wipe out the shareholders and bondholders. Second, this would not be forever so all those worried that this is socialism need to take a tranquilizer. Third, we did it before in the S&L Crisis and it worked pretty well. Stiglitz is not the only Nobel laureate who favors nationalization. So does Krugman:

http://www.nytimes.com/2009/01/19/opinion/19krugman.html?_r=1

By: WaltFrench

WaltFrench — Mon, 26 Jan 2009 23:15:19 +0000

Maybe you could spell out what would happen to the rest of banks’ balance sheets. How about loans or other obligations? Would Uncle Sam repay them in full, rewarding investors who took risky bets with full returns? What would be a fair discount rate?

How about the truly egregious CDS positions? Trillions of ‘em floating around, we hear.

If we’re really going to talk nationalization of banks that have run themselves into the ground, we need a few more details. Time’s a wastin’!

By: Pat G.

Pat G. — Mon, 26 Jan 2009 22:35:20 +0000

“Right now, many banks are reluctant to write off their bad debts, and absorb huge losses, unless they can first raise enough capital to cushion the blow. But they cannot attract that capital without first purging their balance sheets of the toxic assets.”

This conundrum

By: Transor Z

Transor Z — Mon, 26 Jan 2009 21:36:27 +0000

Stiglitz just posted an editorial on CNN.com that sounds to me like he is advocating nationalization:

http://www.cnn.com/2009/POLITICS/01/26/stiglitz.finance.crisis/index.html

By: Kelja

Kelja — Mon, 26 Jan 2009 21:15:28 +0000

damn it, meant (b) -wish I could edit!