Favoring Nationalization Are . . .
The list of those people in favor of nationalization, our longstanding recommendation for the biggest banks in the financial sector, continues to grow.
Aside from myself, here are the folks who are in favor of temporarily Nationalizing the banks, and then spinning them back out:
Alan Greenspan
Gordon Brown, UK PM
Senate Banking Committee Chairman Christopher Dodd
Senator Chuck Schumer
Sen. Lindsey Graham
House Speaker Nancy Pelosi
Republicans (some)
Joseph Stiglitz
Paul Krugman
Alan S. Blinder, Princeton
Nassim Taleb
Nouriel Roubini
Greg Mankiw
J. Bradford DeLong
Elizabeth Warren, TARP Oversight Panel
Dennis Gartman
Chris Whalen
Josh Rosner
Jeff Matthews
John Mauldin
Jack McHugh
Bill King
Matthew Richardson
Dylan Ratigan (CNBC, Daily Beast)
Jesse Eisinger, Conde Nast Portfolio
Martin Wolf, FT
Aaron Task (Yahoo Tech Ticker)
Paul Kedrosky (Infectious Greed, CNBC)
Nicholas Kristof (New York Times)
Mark Gongloff (WSJ)
Richard Parker (Newsweek)
Michael Hirsh (Newsweek)
David Reilly (Bloomberg)
Paul Vigna (Dow Jones)
Henry Blodget (Silicon Alley)
Willem Buiter (FT)
Adam Posen (Peterson Institute for International Economics)
Jeff Macke
Todd Harrison
Calculated Risk (Preprivatize the Banks)
Mark Thoma (Economistsview)
Karl Denninger
naked capitalism
Eddy Elfenbein (Crossing Wall Street)
Bronte Capital
Aaron Krowne Mortgage Lender Implode-O-Meter
Prieur du Plessis (investmentpostcards)
Roger Ehrenberg, Information Arbitrage
Felix Salmon
Interfluidity (Nationalize Like Real Capitalists)
Urban Digs
And those opposed:
Ben Bernanke
President Obama
Tim Geithner
Lawrence H. Summers
Financial Services Committee Chairman Barney Frank
Republican Senator Jon Kyl
George Soros
Meredith Whitney, Oppenheimer
Deroy Murdock (NRO)
Larry Kudlow
James Cramer
Hale Stewart
Tyler Cowen
If I missed anyone Pro or Con, please let me know in comments and I will add them to the growing list . . .
>
Previously:
Why Are Banks So Different From Autos? (December 9th, 2008)
http://www.ritholtz.com/blog/2008/12/why-are-banks-so-different-from-autos/
Time to Get Swedish (January 23rd, 2009)
http://www.ritholtz.com/blog/2009/01/time-to-get-swedish/
Nationalize Now (January 26th, 2009)
http://www.ritholtz.com/blog/2009/01/nationalize-now/
Why Not Nationalization? (February 4th, 2009)
http://www.ritholtz.com/blog/2009/02/why-not-nationalization/
February 20th, 2009 at 9:26 am
I haven’t heard him say it directly, but based on what he has said I would suspect Jim Rogers is against nationalizing.
February 20th, 2009 at 9:33 am
I think the debate is over. Timmy is waiting for the common stocks to go to zero before doing the deed..
Leftback is actually a big fan of the Swedish model, and would like to see more of this in the US.
Good morning inwestors – from Our Nation’s Capital, where I saw a lot of expensive dinners eaten last night.
There is something of a building boom in DC, as Uncle Sam continues to feed the hordes on K Street.
By the way CNBC anchorettes, it’s An-teega not Ant-igwa. Sheesh, don’t these bimbos know anything??
February 20th, 2009 at 9:39 am
BR:I think it would be news to most Republicans that they are in favor of nationalizing the banks in the short term……In truth it’s much more nuanced than you are suggesting although there are some out and out immediate nationalizers like Roubini and Krugman…..I always laugh that you advocate letting the government run the banks while at the same time you are constantly railing against the government and assorted govt officials….It may come to it that the govt has to take over a few of the major names like Citi and BoA not to mention a hundred or so small regional banks but owning these banks is not going to be a five minute exercise like the savings and loan rework, the govt is going to own a lot of these institutions for years…..ready for that?
~~~
BR: That’s the headline:
February 20th, 2009 at 9:43 am
Yeah, Leftback, the one thing it would probably be safe to go long on is K street. It won’t be long until the tiniest of economic decisions need vetting by bureaucrats and lobbyists, who of course, are the source of all the wealth that this country’s hard-working minions have ever managed to create.
February 20th, 2009 at 9:45 am
They’re going to get nationalized whether we like it or not.
Do nothing: we let them fail and FDIC picks them up = nationalization
Do something: they get bought upat overvalued prices before the write-downs = nationalization
So much hot air!
February 20th, 2009 at 9:47 am
I suspect that the Republikcans and Graham are for nationaization more for political gamesmanship than anything else. If Obama and Geithner were for nationalization, they would roll out the body of John McCain to talk about generational theft, etc.
February 20th, 2009 at 9:48 am
Art Hogan was on this morning!….I noticed he didn’t show anyone his derriere
February 20th, 2009 at 9:51 am
leftback Says:
February 20th, 2009 at 9:33 am
I think the debate is over. Timmy is waiting for the common stocks to go to zero before doing the deed..
….In a way there may be a bit of truth in this as with the argument the stress tests are a backdoor into nationalisation…..I’m convinced one of the major concerns is frightening off private capital not only from a role in recapitalizing “new” banks but in averting a rush for the door at all the other banks and financial institutions that are sound at present. BR: since you are such an enthusiast for nationalization why don’t you tell us why there isn’t going to be dash for the door by investors in all banks.
February 20th, 2009 at 9:52 am
Is Bernanke really against nationalization? This week he said he thinks government ownership for “protracted” periods is bad, but then added: “Whatever actions may need to be taken at one point or another, I think there’s a very strong commitment on the part of the administration to try to keep banks private or return them to private hands as quickly as possible.”
February 20th, 2009 at 9:54 am
@Bruce: Nice one! Looks like a retest is inevitable before we have some kind of rally.
I see gold at $1000 and I sense a nasty trap for retail goldbugs.
The CPI was more Goldilocks than deflation or inflation.
So that leaves us with gold as a pure fear trade and those don’t last more than a few days.
I may be wrong but I unloaded GDX and started a smidgen of DZZ. We’ll see how the day goes.
February 20th, 2009 at 9:54 am
jucojames Said:
February 20th, 2009 at 9:26 am
I haven’t heard him say it directly, but based on what he has said I would suspect Jim Rogers is against nationalizing.
reply:
—————-
He would be if share prices had still some value and he could borrow lots of money to short them. He’s be ranting louder than anybody.
*******
Put me in with the camp against bad banks or nationalizing. I’m more in favor of providing the markets with access to lendable funds and then telling banks, methphorically speaking, “Lend of Die”.Use the FDIC in the most sinister ways imaginable to encourage good behavior. Grease the skid with a little fee money to the banks, if necessary. Provide a means to securitize the loans without going crazy about it and provide govt backed insurance for default.
Nationalization is just more fantasy based magic bullet thinking. I doubt anyone has given any aspect of the follow through any thought at all.
February 20th, 2009 at 9:56 am
I need to type better. I meant “Lend OR Die”, just in case you were confused.
February 20th, 2009 at 9:59 am
BR: I also think Gordon Brown would be surprised to find his name on the pro list since his govt is desperately trying to avoid a full nationalization of RBS and Lloyds/HBOS to the extent they are softening insurance terms to protect capital ratios and retain private investors.
~~~
BR: I added this link:
He can say he is against it, but if you do it . . .
February 20th, 2009 at 10:03 am
How are those little token stock buy(s) by Lewis and Dimon a few weeks ago working out? Yikes…..
February 20th, 2009 at 10:04 am
Isn’t the whole idea of nationalization a symptom of what’s wrong with this market? Wall Street has always seen itself as the center of America. As Barry pointed out, the reason for the big selloff last week was that traders expected the government to show up with a big dump truck full of money and say “here you go boys…have at it!” They want to be bought out by the government at top dollar. That’s not what’s going to happen, though. The Geithner plan is a plan to figure out which banks are worth saving, and which banks are…dare I say it…too incompetent to survive?
That’s what’s best for the American people. We’ll fix the banks that are fixable and let the dying ones die. It’s not what’s best for Wall Street traitors, though, and they’re showing their displeasure by pounding stocks down. That can’t last forever, as leftback points out. The President’s plan is a plan to fix the economy from the bottom up, not the top down. That favors folks in Steubenville, Ohio instead of Wall Street, and the traitors on the Street don’t like it.
February 20th, 2009 at 10:07 am
Long ago I ran across a children’s book entitled “Easy Answers To Complicated Questions”.
It’s a curse that the best communicators are also the most shallow thinkers or the biggest opportunists.
February 20th, 2009 at 10:08 am
@hobo
“Nationalization is just more fantasy based magic bullet thinking. I doubt anyone has given any aspect of the follow through any thought at all.”
….In the official sense I don’t think that’s true which is why Geithner is approaching it with great caution. The problem with all the absolutists here is that no one actually lays out the arguments against it…and they are considerable. On the whole I agree with your policy suggestions, they aren’t pretty or intellectually tidy….the flow chart would look horrible……but right now cautious experimentation is greatly preferable to theoretical masterplans.
February 20th, 2009 at 10:12 am
GE in single digits. You just knew THAT was going to happen.
I guess inwestors didn’t realize it was a gigantic hedge fund.
Looking a bit panicky on CNBC – but of course I am not listening.
February 20th, 2009 at 10:13 am
@Lefty:
Well, I’ve been watching this fight now for about 4 rounds…nationalization..banks, autos…hmmmm….
Wait, there is some action!
Down goes Frazier!
http://biz.yahoo.com/ap/090220/eu_sweden_saab.html
GM unit Saab files for protection from creditors
February 20th, 2009 at 10:15 am
“That favors folks in Steubenville, Ohio instead of Wall Street, and the traitors on the Street don’t like it.”
Watch the creditor class start clamoring for a gold standard soon enough when all this funny money starts really destroying the value of their loans. In an ironic twist, the reason the money will get funny is because the creditor class clamored for the authorities to print more of it in order that they be saved. (snark).
February 20th, 2009 at 10:16 am
franklin411 Says:
February 20th, 2009 at 10:04 am
…..The absence of dumptrucks of money is part of the problem but probably the major factor has been the meltdown going on in Eastern Europe. A lot of the big Euro banks are on the hook particularly banks in Germany, Austria, Switzerland etc who are oriented east.
February 20th, 2009 at 10:17 am
N. N. Taleb is pro nationalizing the banks. He would nationalize the “utility” part of banking: taking in deposits and providing checking, and let the lending and investment banking be on the private side with the private investors taking the risk instead of depositors and tax payers. Beaurocrats ought to be able to handle checking accounts without requiring outsized salaries, let alone insane bonuses for taking risk with OPM, seems to me.
By the way, Barry, how did your lunch with Taleb go?
February 20th, 2009 at 10:18 am
> I guess inwestors didn’t realize it was a gigantic hedge fund.
It’s investor, not inwestor =) I love that Superfund ad…
HCF
February 20th, 2009 at 10:27 am
@ HCF: I am just waiting for someone to catch on to my constant allusions to Swedish models….
You guys are way too serious some days.
Gold is either going to scream upwards by $50-100 or melt down into the lower $900s.
It’s going to be interesting.
February 20th, 2009 at 10:28 am
BR: That’s the headline:
Even Republicans may back U.S. bank nationalization
http://uk.reuters.com/article/topNews/idUKTRE51H7C120090218
…..BR: that’s a long way from saying they are in favor of it.
BR: I added this link:
Brown Tightens Grip on Banks as Recession Worsens
http://www.bloomberg.com/apps/news?pid=20601087&sid=aCKRyD7vWfnE&
He can say he is against it, but if you do it . . .
….Barry there’s a big difference between saying you are for it as a concept and saying you’re going to react to circumstances as essentially Geithner has. I follow the UK market fairly closely and all the evidence suggests nationalization is the last resort for Brown as it will be for Geithner. I’m one of your fans but I challenged you to lay out the anti arguments. The markets in the tank this morning because folks are running for the doors at Citi et al. I think the “nationalizers” totally underestimate the dash for the door factor that is going to occur is the launch a raft of nationalisations. And that’s just one of the reasons against.
February 20th, 2009 at 10:35 am
Agreed, otto. There were headlines that the Republicans were in favor of a stimulus bill too, and we all know how that turned out. Frankly, I think that’s also part of what’s wrong with this market–the realization that the Republican strategy seems to be to obstruct the President and hope he fails.
That’s good for the hard core of the Republican party, but it’s bad for the party’s future growth.
February 20th, 2009 at 10:40 am
I believe Ron Paul & Peter Schiff are opposed to nationalization. I would also like to point out that nationalization is not new in the U.S. (although I am unclear on the history of banks being outright nationalized.) I do know that Wells Fargo was nationalized during WWI, it barely survived. Given America’s political history any company that is nationalized will be thoroughly pillaged.
Regards,
TDL
February 20th, 2009 at 10:49 am
otto: Smell the cawfee, dude!
Nationalization has been INEVITABLE ever since anyone with a brain realized the big banks are INSOLVENT, which is the message that Paulson and Bernanke brought to a shocked Congress one evening in the Fall. The intervening period has been merely a further opportunity for the bankers to divest common stock holders of their hard-earned money. No yachts for the shareholders, sorry!
February 20th, 2009 at 10:51 am
franklin411 Says:
February 20th, 2009 at 10:35 am
Politics is playing a big part in the Republican’s response to this whole situation. They’ll be for it until they’re against it. That said I don’t think the market gives a rat’s bottom about what the Republicans think or even the political climate. They know that the Dems are in charge. It’s just that at the moment in the fear/greed equation fear is currently in the ascendant. I have a lot of admiration for Krug and Doc Doom but they are not carrying the responsiblility for a misstep like a major flight of investors from US financial institutions. It’s why the likely targets and the sector generally have been tanking for days. You could say this is an argument for getting it over with, but equally the contagion could take over. It’s not f#$@% easy.
February 20th, 2009 at 10:55 am
You forgot Buffett, the Saudis and the Chinese. I’m guessing they are not big fans of nationalization…
February 20th, 2009 at 10:56 am
Barry, I have heard your name twice on Bloomberg today, you are attached to the quote “Citi goes to zero” from your earlier interview.
Too cool. Maybe you can get Whitney’s job she opened up as a bank analyst.
February 20th, 2009 at 10:59 am
I think it is TIME that is needed before nationalization. You have a bunch of theoreticians running the show at the treasury, fed, economic council. No real world roll your sleeves up and get things done. Hopefully they realize that getting things done is their short coming, we know Geithner and Sumners have the biggest blind spots in recognizing that they don’t know everything.
It will take time to gather the resources (people), and get them ready for any kind of action.
Or they could just be waiting on chase and wells to finally come down so that the big 4 can just be taken down in one swoop. Mr Market is starting to say times up.
February 20th, 2009 at 11:01 am
Well, BRK-A is at 75k today, down from 52 week high of 147k….
Of course, Buffett is about as far removed from the ordinary investor as I am from Naples…but his stockholders must realize they too, would have been better off selling and buying back in after a comfortable sojourn in cash….
Cest la vie…
February 20th, 2009 at 11:02 am
leftback Says:
February 20th, 2009 at 10:49 am
” Nationalization has been INEVITABLE ever since anyone with a brain”
Well why hasn’t it happened since one thing Geithner and Summers don’t lack is brains? And it’s not because of a conspiracy between the Bush and Obama admins and the bankers to defraud the deserving poor…..spare the political hyperbole……I don’t doubt it’s possible/probable that some of the big names and maybe a hundred smaller names are going to end up this way but to pretend there aren’t huge risks is well….
February 20th, 2009 at 11:03 am
I don’t like the term “nationalization.” It’s too broad, as others have pointed out. I am in favor of triage, which is what insurance departments (and banking regulators are supposed to) do every year. Separate the living from the wounded from the dead.
The dead are seized and sold off, with the guaranty fund taking a hit, as well as any investors in the operating company getting wiped out. The wounded file plans for recovery, and the domiciliary states monitor them. The living buy up the pieces of the dead that are attractive, and kick money into the guaranty fund. No money from the public is used.
We have made so many errors in our “nationalization” (bailout) that it isn’t funny. We give money to them, rather than taking them through insolvency. Worse, we give money to the holding companies, which does nothing for the solvency of operating banks. We don’t require plans for recovery to be filed. Further, we let non-experts interfere in the process (the politicians). Better that the regulators get fired for not having done their jobs, and a new set put in by the politicians, than that the politicians add to the confusion through their pushing of unrelated goals like increasing lending, and management compensation.
The concept of the “stress test” is crucial here. It could be set really low (almost all banks pass) or really high (almost all banks fail — akin to forcible nationalization). Clearly, something in-between is warranted, but the rumors are that the test will be set low, ensuring that few banks get reconciled, and the crisis continues for a while more.
I’m in favor of the bank regulators doing their jobs, and the FDIC guiding the rationalization of bad banks, with an RTC 2 to aid them. Beyond that, there isn’t that much to do, and there shouldn’t be that much money thrown at the situation. We have wasted enough money already with too little in results.
One final comment — for years, many claimed that the banks were better regulated than the insurers. Who will claim that now?
February 20th, 2009 at 11:08 am
What strikes me is that the USA isn’t insolvent…unless we want to be..
Rather, we have parts of our economy that should be insolvent, and by delaying the insolvency of the elements that do deserve to fail, we are placing additional stress on the entire economy…
I think Barry’s toes have to go, if it means saving the toes of all the rest of us in the room….
Hiking today…back tonight. The salt mine keeps on going without me…
February 20th, 2009 at 11:12 am
Todd Says:
February 20th, 2009 at 10:59 am
I think it is TIME that is needed before nationalization. You have a bunch of theoreticians running the show at the treasury, fed, economic council. No real world roll your sleeves up and get things done. Hopefully they realize that getting things done is their short coming, we know Geithner and Sumners have the biggest blind spots in recognizing that they don’t know everything.
……With due respect Todd…..what a load of bollocks…..Do you honestly believe the Treasury and Fed is being run by a load of professors and guys who like to use slide rules just for fun……. Mr Market is panicking because it thinks some of the majors are going to get nationalized and it’s spreading to other financial institutions…..
February 20th, 2009 at 11:17 am
CNBC desperately trying to find a bottom caller…this guy sees a “market melt-up…sentiment is as sour as ever”
Where do they find these shills? Market put call 21 day MA is near 3 year LOWS. perfect environment for a melt-DOWN.
CNBC is now just comic relief…their days are numbered as GE breaks 9 in a minute. I think Kudlow will be the guy crying on air…maybe tonight.
February 20th, 2009 at 11:17 am
Joseph Stiglitz has come out in favor of nationalization as well, Barry.
However as far as I am aware, none of the following have weighed in publicly regarding their positions:
Franklin Raines
Dick Fuld
Kerry Killinger
Chuck Prince
Bernie Madoff
Ken Lewis
John Thain
Steve Schwartzman
Sir R. Allen Stanford
Vikram Pandid
February 20th, 2009 at 11:19 am
What does George W. Bush think about nationalization? Oh I long for the good old days.
February 20th, 2009 at 11:21 am
The last thing to go will be tech stocks…but man will they implode in technicolor.
February 20th, 2009 at 11:21 am
Tangelo Mozilo says he doesn’t care one way or the other as he has pretty much cashed out.
February 20th, 2009 at 11:22 am
@bruceTN: “Rather, we have parts of our economy that should be insolvent, and by delaying the insolvency of the elements that do deserve to fail, we are placing additional stress on the entire economy…”
Your comment is leading me in my new belief that by settling this issue with nationalization, it would finally put this whole episode to bed, and while wiping out the old-school wallstreet banking sector, the relief felt by the rest of the market would be shown in the biggest rally ever.(but take the homebuilders and CRE down another 25% first please…)
The stress is from the unclear outlook, and a clear nationalization outlook would be such a breath of fresh air that the economy could finally recover, while continued bailouts would bring more of the same doom and gloom.
February 20th, 2009 at 11:25 am
Add me to the list. I wrote a detailed letter to the Fed on Sept 18th – before anyone was even considering the option…
Http://www.pragcap.com/my-letter-to-the-fed
February 20th, 2009 at 11:31 am
Karl Denninger who writes the brutally detailed critiques of current Treasury and Fed actions under both administrations (Bush and Obama) is totally in favor of purging of “Dead Banks Walking” through seizure and redistribution of viable assets to existing worthy banks. His blog, http://market-ticker.org/ is popular and carries at least one article per day (often more as during this current crisis) with ongoing discussions daily in the associated public forum.
Today it was announced that he is a recipient of the Accuracy in Media (AIM) award for outstanding contributions to journalism via his blog. It will be presented shortly at a Conservative Political Action Committee (CPAC) convention in Washington, DC.
February 20th, 2009 at 11:31 am
Larry is unbelievably flustered…ranting on Stanford’s wife and girlfriend
February 20th, 2009 at 11:31 am
Has anyone else noticed how all these guys predict the market is going higher because of all the cash on the sidelines? The only problem with their observations is that we are in a deflationary period and people are scared to buy anything let alone stocks which is why stocks will not recover for many many many years.
February 20th, 2009 at 11:32 am
Could be worse, could be Japan:
http://www.nakedcapitalism.com/2009/02/japan-on-edge-of-abyss.html
(maybe it is Japan, we just haven’t felt it yet?)
short Yen ftw?
February 20th, 2009 at 11:38 am
Willem Buiter
http://blogs.ft.com/maverecon/2009/01/time-to-take-the-banks-into-full-public-ownership/
February 20th, 2009 at 11:38 am
Citi is below $2 and volume is already at the 90 day average.
So is “the market” saying C is insolvent and $2 is better than nothing, or is this a typical tantrum (WFC, USB, BAC all in the same boat) to force the gubmint to ride to the rescue?
Maybe it’s both.
Would consolidation of megabanks be of any use whatsoever, or would that only make things worse by creating even larger too-big-to-fail entities?
February 20th, 2009 at 11:47 am
Art Cashen of CNBC: It’s only rumors
February 20th, 2009 at 11:53 am
DC @ 11:38
“Citi is below $2 and volume is already at the 90 day average”
Hank Paulson didn’t think our country could survive Citi shares going below $5.
Yet here we are.
February 20th, 2009 at 11:57 am
Barry,
you have to include Mish Shedlock in the opposed to nationalization group. He’s up there with you in the top end of the blogosphere.
February 20th, 2009 at 11:57 am
@otto
Timmy and Larry have proven that they are idea men and they are the ones in charge. Both have a long history of leaving the details up to others to figure out. I’m sure everyone in the fed is committed to doing the best job that they can do, and they do their job very well. Your lifer in government, is a lifer because they don’t rock the boat. The skill sets they possess are not the skills sets that are being called for.
I have absolutely no faith in the ability of civil servants being 2 standard deviations above the mean in their ability to get things done. People like that are rare, and are even rarer in public service.
Sheila Bair has proven she can take a bank over and liquidate, but everything done to date doesn’t come close to touching the size of Citi, … et al
You do have to ask yourself which is worse, Citi and BAC going below $1 and have the threat of delisting, or nationalization.
Just as an aside, could we portray the big 4 C,BAC,WFC, JPM as the four horsemen?
February 20th, 2009 at 11:57 am
Isn’t this odd…for about a year, our whole financial future hinged on every decision Paulson made…now, poof, he’s gone with no input I can see. Is something wrong with this? Doesn’t seem to be very prudent. If Paulson was so important, smart and powerful he should still be there…if not, why was he given so much power?
February 20th, 2009 at 12:03 pm
The Economist supports the idea of nationalizing the banks.
February 20th, 2009 at 12:09 pm
Well, the Economist doesn’t come right out and say they do. But, if you read their latest discussion on fixing banks, they hedge toward the idea. They offer few alternatives.
http://www.economist.com/finance/displaystory.cfm?story_id=12974255
February 20th, 2009 at 12:11 pm
Where’s the “let them burn” list?
February 20th, 2009 at 12:15 pm
Citi / BAC are basically call options right now
February 20th, 2009 at 12:17 pm
Todd Says:
February 20th, 2009 at 11:57 am
@otto
“Timmy and Larry have proven that they are idea men and they are the ones in charge. Both have a long history of leaving the details up to others to figure out.
@Todd…….. there’s a bunch of ex Streeters that have been brought into treasury not to mention a few leftovers from the Paulson era. As to being micro managers I can’t speak to Geithner but where do you get the weird idea that Summers “has a long history of leaving the details to others.” He’s notorious for picking pepper out of fly poop.
………..It’s interesting reading this thread and checking prices………all the really bad action is on the banks…….I suppose there’s a tipping point and we may be getting there……more midnight oil at the Treasury…….Where’s Hjalmar Schact when you need him
February 20th, 2009 at 12:21 pm
Steve Barry –
I missed the Cashin comment…he must have been on during Kudlow and I try to avoid Larry for hygiene reasons, plus he never lets anyone else speak so there’s rarely anything new to be learned from him.
What was the rumor?
February 20th, 2009 at 12:22 pm
demuth Says:
February 20th, 2009 at 12:09 pm
I read the Economist piece…..yep they are edging towards as a last resort……they are basically where I am which is not unusual………don’t want to do it but may have to…….have we reached the tipping point this weekend?
February 20th, 2009 at 12:22 pm
@demuth: I like The Economist magazine but they have an annoying habit of playing it right down the middle almost all the time and arguing both/all sides even when one side warrants far less merit than the other. I know what they’re trying to do here (be “objective” and come across as moderate to sell more magazines) but sometimes it comes across as a little too squishy for my liking.
February 20th, 2009 at 12:24 pm
For nationalization (or “reprivatization”) Simon Johnson (and presumably James Kwak) at Baseline Scenario…Against Ricardo Caballero…
See Kwak´s comment on Caballero: Everyone Get in Line, February 19, 2009 at 5:01 pm, TBS
February 20th, 2009 at 12:28 pm
Pretty wild stuff going in currencies.
I don’t think the world ends today. I think the SP500 rallies this afternoon. The DX has gone pear-shaped here and gold is finding sellers into 1000. It’s sort of recipe for a stock rally….
Nationalize them ALL. Viva la Revolucion.
February 20th, 2009 at 12:28 pm
Mannwich Says:
February 20th, 2009 at 12:22 pm
@demuth: I like The Economist magazine but they have an annoying habit of playing it right down the middle almost all the time and arguing both/all sides
……You mean they lay out all the options and explain it’s sometimes hard to come down one one side or the other because it’s complicated. Actually that’s why I like the mag because it’s not full of loaded bs and over simplifications like Forbes.
February 20th, 2009 at 12:29 pm
That’s funny Leftback- I guess I just fell off the turnip truck because when I was watching CNBC last night the gal in Antigua kept saying Anteega and I thought she was mispronouncing it. I always thought it was pronounced Anteegwa as well. Guess that makes me one big dumbass.
February 20th, 2009 at 12:34 pm
From Mankiw’s website:
“But there is one thing I am sure of: If this is the route we go down, the government had better get in and out as quickly as possible. If it is done right, nationalization will be the wrong word to describe the process”
Yes. “In and out as quickly as possible”. Long enough to wipe out the shareholders, convert bonds into common stock, sell off some assets (maybe a lot of assets), and get the hell out. Then it can work.
February 20th, 2009 at 12:38 pm
Kudlow may be against nationalization, but he has said he would consider putting some of the banks into “receivership”.
There’s not necessarily a big difference there. If the “receiver” is appointed by Obama, and approved by Barney Frank, that more or less constitutes nationalization.
February 20th, 2009 at 12:48 pm
Quick, chaps. Over to the new thread!!
Ahab can ride in the turnip truck to Anteeegwa.
February 20th, 2009 at 12:49 pm
There’s one issue that I haven’t seen discussed much. What to do if the assets at a given bank aren’t sufficient to pay off all of the large depositors?
I would say given them $.50 on the dollar right away (for accounts above $250K), then another $.25 on the dollar 6 months later, and possibly a little more after that. But if the bank assets aren’t sufficient to pay off the large depositors, I think there’s an argument to be made for giving them only about $.85 on the dollar (for accounts above $250K).
February 20th, 2009 at 12:56 pm
DL: “What to do if the assets at a given bank aren’t sufficient to pay off all of the large depositors?”
Mate, Ben’s already printed the cash, so no worries. Now, sell the $ and buy hard assets. Get it??
February 20th, 2009 at 12:56 pm
Add me to the list of Favoring Nationalization. As opposed to all the people (virgins) on that list, I have experienced and live through a massive financial crisis and bank nationalization. Yes I am a Swedish expatriate and history is repeating itself………. maybe it’s time to go back. Bank “nationalization” is doable, there are many approaches, but the banking system has to be dealt with NOW. You can’t wait another 6 months with the hope that the stimulus plan will improve the economy and help the banks balance sheets……. Japan here we come.
February 20th, 2009 at 1:06 pm
DL: “What to do if the assets at a given bank aren’t sufficient to pay off all of the large depositors?”
Here’s a better idea: give them directions to Sandy Weill’s house (or Prince, Fuld, Mozilo, anyone you like).
February 20th, 2009 at 1:16 pm
I agree to a certain extent, otto. It’s a really good mag but at times I don’t think it calls for them to play it squarely down the middle. That’s all I’m saying. I got rid of Forbes for being way too far the other way and really like The Economist. Think overall they’re in a class by themselves but sometimes they’re a bit squishy for me. That’s all.
February 20th, 2009 at 1:25 pm
Citi has a market cap of about $11 billion about now. BoA of about $20 b. They each owe the Treasury about $45 b, and the FDIC is on the hook for their depositors $250,000 each. I’d say it really doesn’t matter what you call where it goes from here. They are effectively nationalized right now.
But remember–”nationalization” of Fannie and Freddie didn’t really change a thing. Each are on government life support, each are insolvent, and each are writing new mortgage loans like it’s 2005. And aside from the FHLB, which itself will soon be “nationalized”, and Ginnie Mae, which already is, there is no other game in town. There’s hardly a privately-held mortgage being written anywhere anymore.
February 20th, 2009 at 1:27 pm
The author makes a pretty good case for not nationalizing the banks, as that would preclude spreading the losses out over time and allowing the banks to muddle through, depositing huge and immediate losses in the here and now.
It’s a very good argument. Folks should give it a read.
In the end it all comes down to whether or not sufficient confidence could be maintained in the banks. We might get there by evicting the current bad management (NY attorney general Cuomo might help in that regard) and installing more capable fools. But it would take a fool of extreme capability and competence to bring confidence to Citi.
I remain in the nationalization camp, but I can see the opposing argument.
February 20th, 2009 at 1:28 pm
damnit. stoopid wordpress.
here’s the url that should have appeared in the prior post:
http://brontecapital.blogspot.com/2009/02/bank-solvency-and-geithner-plan.html
February 20th, 2009 at 1:32 pm
It ate the first half of my post. Wordpress is a strange brew of occasionally infuriating and inconsistent behavior and generally consistent and acceptable behavior. It reeks of deep-seated software flaws.
February 20th, 2009 at 1:35 pm
I am not as smart as the pro and con list so I defer my opinion.
February 20th, 2009 at 1:36 pm
Ayn Rand. She came to me in a vision last night and she is TOTALLY for a temporary nationalization. Said she’s been busy busy busy of late.
February 20th, 2009 at 1:43 pm
Add Chris Dodd! (per CNBC a few minutes ago)
February 20th, 2009 at 1:46 pm
Barry, it’s a bad sign that so many people are agreeing with you. Makes me think you might be wrong on this one.
February 20th, 2009 at 1:46 pm
FWIW I agree with BR: orderly bankrupcy-style restructuring and liquidation of garbage assets at legit prices. Basically, bankrupcy without the dreaded ‘B’ word. Call that ‘nationalization’, and I’m a-fer it.
February 20th, 2009 at 1:54 pm
BR,
By nationalization, what exactly do you mean? Do most or all who share your belief share your definition, or does each have a different idea of the definition of nationalization?
In other words, is this just an empty suit, air headed slogan or is there some realistic meat behind the idea?
Assuming the definition of nationalization is mostly agreed upon THEN, please outline the steps IN and OUT and what will or should happen while nationalized. By plan, I don’t mean that “We Should Do What Sweden Did” constitutes a plan since it is only a slogan.
If there are multiple definitions of nationalization and multiple processes, assuming anyone has actually thought this through, then pardon my snickers. I will laugh heartily if multiple responses are available, all different, and votes for the best are required. For something as important as this and for such a background clamor to be associated with it, the largest part of the solution, implementation, and benefits, should be obvious and a shared belief.
A response to this should constitute a full column, not just a couple of snarky sentences as a tag on reply. I will be willing to revise my objections if a thoughtful response can be provided. Otherwise, I’m just going to regard “nationalization” as trickle down empty suit jargon.
If someone has already done this, please point to it or excerpt it in a posting.
yours truly,
DH
February 20th, 2009 at 2:10 pm
BR,
Addendum,
I read your references above. I would like to see something more in the form of an outline / cookbook. Soft statements such as We Need This Now, are not processes. Also, as I said, a consensus of the broad points among the majority is a requirement. If three people have 6 ideas (on one hand / on the other hand) then, as I said before, the clamor for nationalization is just empty suit noise. It may be a good idea, but not if there are as many ideas about nationalization as there are recipes for red beans and rice.
February 20th, 2009 at 2:15 pm
@dead hobo:
As I said above, depending on the definition, they’re already “nationalized”.
But I favor what I think BR does, which is liquidation. You can call it bankruptcy if you want, but banks don’t actually go bankrupt, they go into FDIC receivership. I don’t think that sort of thing is what most are talking about when they say nationalization. I think they mean a sort of conservatorship, like Fannie and Freddie, which I am absolutely against. It yields zombie banks, like Fannie and Freddie are zombie mortgage companies.
February 20th, 2009 at 2:21 pm
The Curmudgeon Said:
February 20th, 2009 at 2:15 pm
@dead hobo:
As I said above, depending on the definition, they’re already “nationalized”.
But I favor what I think BR does, which is liquidation.
reply:
——————
For all I care, it can be a plan named Sue. (apologies to Johnny Cash). For all who say “Nationalization Now” please provide common terminology, a common objective, and a common process. You just said there isn’t one.
February 20th, 2009 at 2:31 pm
@ Curmudgeon 2:15
For a couple of zombie mortgage companies I say that Fannie and Freddie seem to get the mortgage lending done in a way no other private entity is doing right now. So a handfuld of government owned zombie banks doing the same with the other types of lending would seem to be just what the doctor should order.
February 20th, 2009 at 3:02 pm
I gotta say when people start seeing some Bankers/money managers /thieves/incompetent idiots you get the idea being kicked out of some glass towers and marched off to jail is when confidence in the market will return.
February 20th, 2009 at 3:09 pm
Seriously, if we were going to let these institutions fail (which is what nationalization is) we should have done so like a proper capitalistic society. We should have done so starting back in the 90’s with LTCM. The initial shock of having let all these companies fail would have been immense, no question, but we would likely be on our way out right now rather than continuing this slide down. Furthermore, and the real benefit of this, would be the dividends this policy would have paid down the road when future execs thought about loading up on crap and leveraging it.
I don’t understand how the people that were so in favor of handing out taxpayer money to these companies in Sept./Oct. so that they may be saved are now, that the companies have been buoyed up for a few months, in favor of nationalizing them. Wait, maybe its because in Sept./Oct. you had positions in these companies, you reversed these in Dec. and now that you are no longer on the hook you want these financial sector companies to be nationalized to speed the reversal in the rest of the economy to which you have been building a long exposure after have reversed you position in financials. The point is we are all economic agents, and we maximize our expected payoffs, and align our beliefs so as to not experience cognitive dissonance. We have no internal sense of consistency of beliefs, all we care about is making (losing) as much (little) as possible and we use any rational means of justifying these beliefs to ourselves and others.
I would be hard pressed to believe that any of you don’t take the stance that you do on this issue for any reason other than personal gain.
February 20th, 2009 at 3:36 pm
@ adavydov: With respect, sir, you’re being a tool here. The only people who were long the banks all the way down were the Big Stupid Long Only Funds.
BR and Chris Whalen, Roubini and almost everyone who posts on here was smart enough to see the banks as entitites very similar to criminal or fraudulent enterprises – in short, an accident waiting to happen. We want nationalization to save the taxpayers money. We also want clawbacks, perp walks and show trials.We have been short or out of the banks the whole way down.
Except for that day when they banned shorting and I rode the big squeeze… that was awesome.
February 20th, 2009 at 3:49 pm
Barry amd colleagues! Love the blog, must read everyday.
My colleagues and I at http://investwithanedge.com/ are fully on board with nationalization. In fact, a Reuters writer sought comments a week ago from me (and seemed surprised with such comments a week ago) and yesterday and today, two came calling seeking more poop. The Greenspan thing lit them up. So, the idea has gone mainstream….we’re getting close. Cheers from Texas,
john schloegel
February 20th, 2009 at 3:50 pm
Is CNBC using me for their ideas? On Yahoo Finance, they have an article that asks about definitions for nationalization. Their post is about 20 minute after mine. Nyah Nyah. I beat you to the idea, but you get cred for offering some potential definitions.
February 20th, 2009 at 4:04 pm
If Chris Dodd is in favor of nationalization, I have to stop myself and run a complete systems check before I reaffirm my support for liquidating the TBTF banks. What happened to him, did the banking lobbyists checks bounce?
February 20th, 2009 at 4:07 pm
Contra : James Surowiecki (Wisdom of crowds)
February 20th, 2009 at 4:21 pm
OptionArmageddon is in favor of nationalization
http://www.nydailynews.com/opinions/2009/02/02/2009-02-02_a_bad_bank_is_a_very_bad_idea.html?page=0
February 20th, 2009 at 4:30 pm
@leftback: “We want nationalization to save the taxpayers money” followed by “We have been short or out of the banks the whole way down.”
Thank you for making my point, you want the banks to be nationalized to make more money not to save taxpayers. And let’s be brutally honest with ourselves on this point, if you (again speaking figuratively, not attacking you in anyway) wanted to save taxpayers money you would have been in favor of letting the banks fail back in Sept (I don’t know whether this was your stance on the issue then, but the majority of people posting here at the time were clamoring for a Lehman bailout).
Also, please explain to me how the government taking over is going to help anything. These idiots can’t figure out how to disburse and monitor funds to these companies and yet you (and here I am addressing you directly) think that they will actually be able to run these institutions for a profit? No offense but that’s a case of jumping out of the frying pan and into the fire.
As a sidenote, I don’t disagree with what you say I think nationalization/bankruptcy was the way to go for financial and auto, only I think that this was the way to go from get go. If you share these beliefs you can make a defensible case for wanting to save taxpayers money. However, as long as you are short financials please don’t talk of nationalization so altruistically as you will be the first to benefit.
February 20th, 2009 at 4:36 pm
Jesse @
http://jessescrossroadscafe.blogspot.com/2009/02/market-slumps-on-speculation-several.html
“That is the point that is being lost in this opaque analysis and muddled discussion. The Big Money Center Banks will be nationalized one way or the other. The only real variable is how much money they can take out of the system before it happens.”
What I said earlier about the ship’s officers looting the passengers’ valuables from the purser’s safe as the passengers wander dazed among the deck chairs now sliding down the deck.
February 20th, 2009 at 4:40 pm
@ adavydov
Back in September I was for a a la Sweden solution and peppered my Congressional rep and senators with faxes saying as much, but knowing that was non-starter at the time, pleaded if they must do a bail-out to stipulate that TARP dollars must get at least as good a deal as Buffet got.
February 20th, 2009 at 4:42 pm
@adavydov: I’m not going to speak for everyone here, but many of us WERE in favor of letting the banks fail in September/Oct/Nov. We certainly weren’t in favor of TARP I, or least most of us weren’t. It’s not all about pure self-interest for many of us. You’re being far too cynical. I’ve made money on this recent downleg but it doesn’t feel great because I know this country is in deep, deep trouble. I just think that many of us saw it coming and thought we’d be crazy not to protect ourselves.
February 20th, 2009 at 5:00 pm
Nationalization: today’s CW. You can’t rule it out of course but the last couple of days has all been about sentiment shifting causing panic among investors and irrational exuberance here. I don’t think we’ve reached the tipping point yet, in fact the signs are they could be going to tough it out. And they can just as long as government is providing the umbrella.
“What I said earlier about the ship’s officers looting the passengers’ valuables from the purser’s safe as the passengers wander dazed among the deck chairs now sliding down the deck.”
………Oh well
February 20th, 2009 at 5:16 pm
The idea that the government is somehow increadably incompetent and couldn’t possibly run the banks any better than the private sector is nothing but a right wing talking point – and as all the other talking points without any backing by facts. Having observed what the privately owned banking and investment sector has been doing in the last decade it is outright absurd to suggest that they are so much better at leading competently than e.g., our government run military. Yes all big organization make big mistakes but the myth of private efficiency and competence has been punctured for all but the most ardent ideologogs. When you look at businesses such as utility companies it has been shown that publicly owned ones produce a better product for a better price than the privately owned counterparts (for whom cutting corners and jacking up prices is part of the corporate mandate).
February 20th, 2009 at 5:33 pm
@DeDude: The government is incredibly incompetent, this has nothing to do with right or left-wing they are all fing idiots (ex. last president).
As for your anecdotal evidence that the government can run private companies, regardless of sector, your sample is rather small and sector limited, therefore any extension of your argument beyond utilities is nothing more than speculative in nature: a) this could be due to pure luck, b) this could be due the nature of the sector or c) there are endogenous factors for which you are not accounting that are affecting the results of the study. For a broader sample with more likely results consider the USSR.
“… the myth of private efficiency and competence has been punctured for all but the most ardent ideologogs.” So does this mean we should get rid of the private sector altogether?
February 20th, 2009 at 8:12 pm
I’d change the heading of the lists to :Those who SAY they favor/oppose nationalization. Nobody really wants bank nationalization but most recognize that it’s required for some of these zombie banks. Many of those on the nay list are constrained by their positions
February 20th, 2009 at 8:47 pm
Steve Barry Says:
February 20th, 2009 at 11:57 am
Isn’t this odd…for about a year, our whole financial future hinged on every decision Paulson made…now, poof, he’s gone with no input I can see. Is something wrong with this? Doesn’t seem to be very prudent. If Paulson was so important, smart and powerful he should still be there…if not, why was he given so much power?
SB,
do you Really need an answer to that?
if so, see “BullPasture”’s nom deBlog for a clue..
February 20th, 2009 at 9:45 pm
@Hoffer: Who’s this Paulson guy you’re talking about? Can’t…seem…to….recall.
February 21st, 2009 at 12:25 am
Excuse me, but it seems that the only ones opposed are the only ones who have a vote THAT COUNTS.
Or, as Stalin wisely said: The dogs bark, but the caravan moves on.
As for me, the only nationalization that would work would be one that kicked surviving employees pay down to the U.S. 2009 General Schedule (GS) Pay Scale. Anything less is simply moral hazard.
Since I doubt that will ever happen here, I’ll be seeing you at SPX 150.
February 21st, 2009 at 12:48 am
Barry,
Have you ever taken, or read about, a course in logic? [BR: Yes] Your long list of folk who have magically decided to nationalize the banks (aka turn everything over to bureaucracy and see what happens) is a brain dead idea. [BR: Its not a bureaucracy, its only temporary] Are you crazy? [BR: Yes]
If the King says a thing is true, it’s true. If the big-list majority says a thing is true, it must be true. Wrong. [BR: This isn't majority rules, it is all of the major proponents pro & con, with links to their well written, extensive arguments].
Your list only identifies hackneyed hobbits versus folks who are trying to get a big problem back on track, the economy. Don’t you question siding with Silligan Radigan and Easy Al Greenspan about policy and decision-making? Our banks are fine and will be around long after you and I are gone. [BR: Speaking of crazy . . . ]
You up take a moronic idea; “let’s kill the banks and see what happens”, (Yeh! Great idea. Why don’t we just self destruct in the middle of a crisis.).
I was shocked by your joining this group of dilatants. Add up the numbers.
1. When Wild Bill Clinton chided Obama this week to be more positive on the economy, read between the lines. That asshole is trying to preempt our leader and take credit for a market charge that is built into the recent overbought situation. It’s time to buy! (Sorry Bill. Your legacy is Monica, not as wizened advisor to the President.)
2. When Cramer joined thc cause and pushed for taking out the big banks, it’s time to buy banks. (Another self-serving ass who is seldom right).
1 +1 = 2 With Cramer and Clinton on the other side, you know you are right. Get into the market now.
When Citi closed at $1.95 Friday it was time to buy banks. I bought all day and will sell covered calls next week.
You’re on the wrong list Barry. Buy America today, banks, stocks and all.
~~~
BR: Your logic is impeccable, and your arguments most persuasive. On Monday, I will be bidding for 200,000 shares of Citigroup — or the equivalent of a small starter home on Long Island. Thank you for the investment advice.
February 21st, 2009 at 9:29 am
What about Paul Volcker? Does he want to Nationalize or not?
February 21st, 2009 at 10:14 am
Ron Paul, Marc Faber, Jim Rogers, Peter Schiff and just about every member of the Austrian School of Economics is against. Of course, they are the people who saw the problem coming a long time ago and predicted the economic contraction, housing crash, derivative fiasco, etc., so I do not expect anyone to listen to them. Instead, the same idiotic ideas that created the problem will carry the day once again based on the justification of political expedience.
February 21st, 2009 at 11:13 pm
Yeah, I’d be interested in knowing where Volcker stands on this.
February 22nd, 2009 at 11:38 am
Re those opposed: Kudlow: anyone who has been listening to him for the last couple of years is probably in debtor’s prison by now, so he doesn’t count. But Bernanke, Obama, Geithner, Summers and Frank trump everyone on the pro list plus anyone else who might join the pro list. So unless and until they go from con to pro, it isn’t going to happen.
February 22nd, 2009 at 3:53 pm
VangelIV has it right. And of course most everyone will ignore what Austrians have to say because it doesn’t fit in with their Keynesian theories – and why anyone still thinks Keynes was onto something is beyond me.
For what it’s worth, I’m also against nationalization. In fact, I think the government should do nothing. If they had done that last year, we’d be in a deeper recession right now, but we’d be on the way back up. This death by a thousand cuts policy simply delays the inevitable and isn’t helping anyone.
http://www.effor.com/blog/index.php/2009/02/21/less-than-nothing
February 23rd, 2009 at 5:57 pm
First off, Barry, I really enjoyed your reponses to commenter “Marcus”. If I didn’t value my anonymity so much, I’d suggest myself on your list. I’ve been banging this drum long before most of these folks.
Last Fall, I was advocating a nationalization of Wells Fargo, in order to create a “good bank”, the Third Bank of the United States. It could have been up to speed operationally by now; ready to accept the branches, deposits and viable assets of the soon-to-fail C and BAC.
The WSJ got around to discussing this possibility by the beginning of this year:
http://online.wsj.com/article/SB122757211390954799.html
Instead, we’re just wingin’ it, I guess.
February 23rd, 2009 at 6:00 pm
My sense is that Ricardo Caballero’s arguments against nationalization have had some sway inside the Obama administration. He very much believes the current crisis to be one of ‘liquidity’ and not ’solvency’.
http://blogs.ft.com/economistsforum/2009/02/nationalisation-without-prices-a-recipe-for-disaster/
February 24th, 2009 at 10:25 am
you can now add Bill Gross to the “against nationalization” list.
May 2nd, 2009 at 2:31 am
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