If Not Nationalization, Then What?
If Not Nationalization, Then What?
The question that everyone seems to be asking about the Obama administration’s plan for the financial system is: “Should the United States nationalize some banks?”
There’s been a chorus of calls for nationalization — from Paul Krugman and Nouriel Roubini to Alan Greenspan and Lindsey Graham — which thus far the Obama administration has resisted. As Roubini noted, however, the “stress test” that Treasury Secretary Timothy Geithner proposed in his financial stability plan naturally leads to nationalization:
[T]he reality is that Mr. Geithner is going to confirm the insolvency of the financial system. Once we face this truth, there really isn’t much left to do but nationalize. We are not talking about the government operating the banks for the long-term. But, as was done in Scandinavia in the early 1990s, we are talking about orderly clean up, then reselling the banks to private investors.
Of course, there is the question of the political viability of nationalization. Obama has argued that “America’s different,” and won’t stand for nationalization. And as The Hill noted, federal ownership of troubled banks would play into false claims that Obama is a socialist.
But if not nationalization, then what? Geithner’s public-private investment fund may get toxic assets off the banks’ books, but nationalization is a more straightforward process, and doesn’t depend on Wall St. being willing to buy the junk currently clogging up the banks. And the longer nationalization is delayed, the longer the solvency of the entire banking system will be in question. Thus, more good banks will get dragged down into the mud with the bad.
As Michael Hitzik wrote of the banks, “We bought them. We own them. The only problem is that we’ve failed to exercise our right to control them.” Indeed, another benefit of nationalizing is the opportunity to wipe the bank’s management slates clean. But if nationalization occurs, it needs to be done in a quick manner. There’s danger in allowing the banks to sit on the government’s hands for too long; “prolonged government intervention in the Indian and Chinese banking systems led to major inefficiencies, which stymied economic growth.”
The administration is currently reassuring banks that nationalization isn’t coming. As Matthew Yglesias wrote, “If I were Tim Geithner, I would keep offering these reassurances to executives at large banks right up until the minute I nationalized the first one.” But if the administration is committed to a plan that doesn’t involve nationalization, then it should lay that plan out, because it’s beginning to look like nationalization is where all roads lead and the public needs to be educated about the alternative.
Cross-posted on The Wonk Room.
The Obama administration has provided few details about its plans to shore up troubled lenders, sowing confusion in the markets and inside the banks about its intentions. With so much uncertainty, some investors are abandoning banking shares, fearing shareholders will be wiped out if the government seizes control. The worry, investors say, is that Washington is running out of time and options. “Banks live on confidence, and there is precious little coming from the new Treasury secretary,” said Gary B. Townsend, a former federal banking regulator who runs his own investment firm, referring to Timothy F. Geithner. “We are getting only confusion.”
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Waaaitaminit… Lindsay Graham? Has anyone alerted him, or Rush, or Hannity, that he is engaging in potential Socialist activity?
Shame on him… shaaaaame.
February 21st, 2009 at 1:10 pmAnyone else been getting screwed by banks that we have been bailing out? They deserve to be nationalized and their executives paid civil service wages.
February 21st, 2009 at 1:12 pmBanks need recapitalization. That means new owners, Uncle Sam or otherwise. Tim’s plan uses Treasury cash with leverage from the Federal Reserve Bank. If Uncle Sam nationalizes, it’s to clear the slate for new owners, which happens to be America’s shadow banking system.
Greed and leverage got America into the mess. Taxpayer backed greed and leverage is the plan to get us out. America, land of the hair of the dog.
February 21st, 2009 at 1:13 pmnationalizing the banking system would be a fine idea, nationalizing the current banks would be a bad idea
we cannot afford the toxic debt from these gamblers, their debt must be allowed to resolve, the new banking system should take out the profit model and should definitely include re-acquiring our money, the fed bust be abolished and “the prime” needs to go toward government expenses not toward the profit of a few people
February 21st, 2009 at 1:15 pmIf I were Tim Geithner, I would keep offering these reassurances to executives at large banks right up until the minute I nationalized the first one.”
If I were Tim Geithner, I’d realize I don’t I have what it takes for the job and return to my cushy post at the NY Fed. He’s indecisive and afraid of hurting the feelings of those who got us in this mess. You can’t just set it and forget with these parasites.
February 21st, 2009 at 1:17 pm“Banks live on confidence, and there is precious little coming from the new Treasury secretary,” said Gary B. Townsend, a former federal banking regulator who runs his own investment firm, referring to Timothy F. Geithner. “We are getting only confusion.”
Was he so bored with not doing his job as a ‘former federal banking regulator’ that he decided to start ‘his own investment firm’ getting around the regulations
February 21st, 2009 at 1:29 pmthat he didn’t enforce?
McWars,
ShamWow!
heehee.
But seriously, your probably right.
February 21st, 2009 at 1:29 pmMy guess is a lot of the problems stem from banks underwriting credit default swaps (AIG is a prime example). The gov can probably walk away from some of the obligations if they ask the counter party to provide ownership/trading history (shorting history) if the counter party did not own the underlying security when buying the default swap. Lots of games were played in buying the default insurance and then setting the house on fire (shorting). One could argue price manipulation and go after ill gotten gains and securities violations. I would venture many players would walk away if faced with the risk of going to jail. This could save the gov billions and billions. But does congress have the balls to do it given they were in bed with the hedge funds.
February 21st, 2009 at 1:34 pmThey should nationalize tha banks. And when it comes time to re-sell them to private investors, they should not allow anyone who was on the board of any bank that took bailout money to work in any bank again.
The problem isn’t how much confidence banks have in Washington, the problem is how little confidence people have in the banks and the people who ran them into the ground. It’s not the fault of The People that the folks in the banking industry didn’t get as stinking, filthy rich as they would have liked.
I hear a lot of complaints from Republicans that this bailout plan is going to reward people who made bad decisions. The truth is that the Republicans want to reward people in the banking industry who made bad decisions.
February 21st, 2009 at 1:34 pmI don’t think anybody knows what they’re doing. I think we’re in for a few years of hell.
February 21st, 2009 at 1:37 pmIt’s not if the banks should be nationalized…it’s when! There needs to be some banking holidays now and banks nationalized six months ago. I think the best plan would be to incorporate a US Federal Bank system and let the private banks fail if they were mismanaged. If the US can run a post office then the US can run a bank. There are no other options, the economy has collapsed and the government needs to put it’s thumb down hard on mismanaged banks or risk a government collapse, which I think the Republicans would welcome.
February 21st, 2009 at 1:49 pmIt’s an old, perhaps somewhat predictable approach that Obama’s taking here.
February 21st, 2009 at 1:52 pmAt the last minute he’s going to allow himself to be dragged, kicking and screaming, into ‘nationalization’ of the banks, thus proving his often-stated willingness to listen to all ideas and choose the one that makes most sense and (at the time) getting the consummate conservative–Lindsey Graham –to support him (Obama) as he does what, from the very beginning he knew was the right thing.
Wayne A. Schneider Says:
I hear a lot of complaints from Republicans that this bailout plan is going to reward people who made bad decisions. The truth is that the Republicans want to reward people in the banking industry who made bad decisions.
And people on Wall Street . . . in other words, “their people.” Main Street USA, not so much. Clearly, a home owner or small businessman who made bad decisions is just a dead weight and should be kicked to the curb.
February 21st, 2009 at 1:54 pmI don’t think US government should nationalize banks, but as a matter of principle in free market system…if you own the majority of the stocks,then you have the majority right to sit on the board.
February 21st, 2009 at 1:55 pmThe money that US government paid for banks like Bank of America and others is probably close to if not more than these banks market value if all banks stocks were traded and sold that day.
In Europe when governments handle big money to banks,they have representation in the decision making,here we are afraid of this because it looks more like socialism.
But whatever Geithner does he should allow more American government in decisions made by banks until debt is paid to US government.
Bank Bailouts, Swedish Style
by Olga Pierce, ProPublica – January 23, 2009
For taxpayers who feel like they are getting nothing in exchange for the bailout billions being pumped into banks, one former Swedish official has a solution: Be wise, nationalize.
Observers who can get past the shudder that the word itself often elicits point to many benefits of such a plan, which former Swedish minister of fiscal affairs Bo Lundgren outlined for the New York Times [1].
At the beginning of the last decade, Sweden was faced with a collapsing real estate bubble. Instead of merely extending risky loans to banks, which is the U.S. approach, in 1993 the Swedish government actually took control of problematic assets and grouped them into a “bad bank,” which, in classic Orwellian fashion, they named Securum [2].
The bank was then kept afloat with public funds, awaiting an economic recovery to increase the value of the assets, which, according to the Times, included the Australian Embassy building in Myanmar and “a guitar that was said to have belonged to John Lennon.”
By most accounts, Securum was a success. Slated to stay open for 15 years, it closed after four, and an analysis [3] (PDF) by the Federal Reserve Bank of Cleveland found Swedish taxpayers had recovered more than half of the 24 billion kronors ($2.88 billion) in public funds pumped into the company.
Dabbling in office supplies, real estate and as noted above, guitars, was also a “stimulating” intellectual exercise, former Securum CEO Lars Thunell told the Times.
Finally, the threat of government control scared many banks away from seeking government bailouts at all. Several of the largest Swedish financial institutions found ways to solve their problems without government help.
Of course, it is not clear whether the scale of the current U.S. crisis makes the Swedish model replicable.
And for those hoping a bank nationalization program would solve U.S. financial sector woes once and for all, the Swedish example is also enlightening. Late last year, Stockholm began negotiating another bank bailout.
February 21st, 2009 at 1:55 pmBe wise, nationalize.
I think I’ll steal that ;)
February 21st, 2009 at 1:59 pman analysis by the Federal Reserve Bank of Cleveland found Swedish taxpayers had recovered more than half of the 24 billion kronors ($2.88 billion) in public funds pumped into the company.
Remember, that’s a fifty per cent return on the toxic stuff.
Would those rates of return be possible in America’s case?
February 21st, 2009 at 2:05 pmYeah, after all, no democrat has ever inherited a bad economy from a republican and turned it around…….
oh, wait…
February 21st, 2009 at 2:14 pmTim has made it so clear a 5 year old could understand but of course the Media isn’t that smart and the GOP still likes having Americans not think. Per Tim Geithner’s website each bank will be reviewed and if that bank isn’t handling the bailout money correctly they will have to return the amount they were given and work out their own problems. Americans will know which Banks they are. Up dates are on Tim’s website. Citigroup and Bank of America will be checked and if they fail their own their own. Americans will still have other Banks to use that are following the law. Even President Obama said don’t paint all the Banks with the same brush. I wish people would just read, as it’s common policy for the banks to be reviewed by the Govenment.
February 21st, 2009 at 2:16 pmso, the stock market falling – was that because they don’t WANT the banks nationalized? … or because of the uncertainty? …
i remember hearing, don’t look to the markets…
February 21st, 2009 at 2:23 pmseems everybody IS…
oh, and i have nothing invested, in case it matters…
February 21st, 2009 at 2:23 pmjust trying to get an understanding…
Banks themslves are toxic. Maybe bank inspectors should wear haz-mat suits.
Government review of banks has not proven to be worth much. If they had really done a “review”, we wouldn’t be in this mess.
And there are intelligent people out there, talking about the need to nationalize the banks, but Lindsey Graham is not one of them.
Geithner needs to get out of his ivory tower, get down on the street and go to work. If he can’t, he should go back to Wall St. and Harvard and write a book. I am developing contempt for his arrogance.
February 21st, 2009 at 2:27 pmThey are trading paper bought on inflated value, this is the inevitable correction.
February 21st, 2009 at 2:31 pmoy, fred… i don’t even know if you answered my questions…
February 21st, 2009 at 2:33 pmI’m sorry Katy, I don’t know why the market should affect the banks, it should be the other way around, don’t you think?
February 21st, 2009 at 2:36 pmFred says
Not this bad in our lifetime. Seriously, this is way bad. I hope we’re lucky, but I’m not counting on it.
February 21st, 2009 at 2:49 pmIf Not Nationalization, Then What?»
There seems to be more dems questioning the smears goppers try to tag on rather than a complete outrage over the mess these gopper b@stards have gotten US and the global economy into. These folks have the nerve to smear socialism = nationalism, as we have heard them time and time again, when they should be hanging their head in shame and maybe make a decent attempt of offering a solution.
February 21st, 2009 at 2:55 pm“prolonged government intervention in the Indian and Chinese banking systems led to major inefficiencies, which stymied economic growth.”
This statement is not true at all. China has had the most growth of any country over the past dozen years and will continue on this path utnil they are the world’s super power. Don’t kid yourself, and don’t worry about it, it’s well on it’s way.
February 21st, 2009 at 2:57 pmWhen I read statements like this I have to take everything else with a grain of salt.
Of course the US should nationalize the banks. If anything to bring needed regulation. What have we got to lose at this point?
February 21st, 2009 at 3:03 pmsounds logical, fred, but i really don’t know…
seems no one else wants to tackle the question either…
thanks anyway.
February 21st, 2009 at 3:07 pmJust heard a re run of Stephannie Miller where she is asking Babe Buchannan about the NY post cartoon.
This woman lied… claimed she had not seen it and then talking about the economy/banking used the word socialism with horror and voice breaking up, as they all do… They react this way – smearing the dems but have no solution.
February 21st, 2009 at 3:12 pmWilliam K. Black is the GoTo Guy on this issue. I told him he has my vote for Deputy Attorney General for Financial Crimes. Google his name, and the n read everything you can find that he’s written.
The extent of the insolvency is now what they’re frantically trying to keep under wraps, lest there be a epidemic panic.
February 21st, 2009 at 3:15 pmBobby G: Deputy Attorney General for Financial Crimes
I think that makes a lot more sense than a chief performance officer. Wouldn’t a CPO just be a unnecessary overlap of the OMB?
February 21st, 2009 at 3:34 pmkaty, to my knowledge nationalization wipes out investors and creditors. The qualms are with top management and boards of directors, so a conservator ship ala Fannie Mae/Freddie Mac could be best.
Geithner should have already reached his decision by now. I understand the Obama administration feels cornered between tough critics and allies who want fast movement, but if Geithner isn’t providing Obama all the help he could use on this central problem, he needs to go.
Sorry for the late response.
February 21st, 2009 at 3:40 pmMonopolistic financial capitalism is dead—it killed itself and it’s going to take most of us with, if something isn’t done. Whatever you call whatever it takes to survive and make progress, we need start making energy, environment, and quality life indicators of economic health—not money made by the economic elite.
It seems to me that most of the opposition to nationalizing is emotional. That’s not an argument for nationalization, but for putting economic survival ahead of ideological purity and nostalgia.
February 21st, 2009 at 4:24 pmI want that round of easy money back. During the housing boom that George W. Bush created I personally threw my kids out of the house because I was selling it. The time was right. I didn’t care how my house was sold just that it was sold. And the appraiser was generous and I made a killing. If only a few can succeed that makes success grander. I can call myself one of the successful because I can tell people that they are failures.
February 21st, 2009 at 4:43 pmBy the way conservatism is coming back big. A great american is into money and they need a representive. So Mitt Romney 2012. Opening and closing bell. That is the good life. A cool and calculating Wall Street.
February 21st, 2009 at 4:46 pmCG,
You’re lucky I don’t know you. Your kind make me sick. In fact, your greed and the greed of people on Wall Street (which, BTW, is not a virtue) is one of the causes of the economic problems the entire nation faces today.
When it comes to making yourself a lot of money, you might be a success. But when it comes to being a human being, you’re a failure.
February 21st, 2009 at 4:57 pmhad enough – i heard that too… babe says she didn’t see the cartoon, then went into all the talking points about it…
thanks mcwars… i think i understand better…
as for back to the future guy… 80s is it? greed is good?
February 21st, 2009 at 5:01 pmand you’re here why? ’cause you’re not going to convince us…
but you keep telling yourself that stuff…
Nationalizing the banks is what they want President Obama to do so they can say it was on his watch that Capitalism failed.
10 years from now no one will remember what got us there, all they’ll remember is the first Black US President, a democrat no less, ended capitalism. Nationalizing the banks is not an answer. It is running for the life boats.
Our ship hit an iceberg and it has a hole in it. That hole is FROZEN CREDIT.
Bush gave the banks 350 BILLION dollars to lend out without any conditions tied to it compelling them to lend it out.
So they didn’t. And lending remains frozen.
We’ve thrown about a TRILLION dollars at this problem and we’re throwing a TRILLION more at it, and it’s not doing a DAMNED THING.
In fact, stocks tanked AFTER signing the stimulus bill and continued to CRASH all week! TO a SIX YEAR LOW!
Why?
Because investors KNOW what I know.
That LENDING MUST RETURN FIRST, BEFORE we throw money at other areas.
Giving tax incentives to try and stimulate home and auto sales BEFORE addressing the loans needed to buy those homes and cars is like giving policemen bullets before you give them the guns.
It’s like giving carpenters nails without hammers.
Its STUPID. And it makes no sense.
We must first address lending, THEN we can worry about tax credits for home and auto sales, bailouts for lenders and auto dealers, etc.
Once we deal with the credit freeze.
February 21st, 2009 at 6:13 pmAll Congress has to do is take out 100 Billion or so out of the TRILLIONS we’re throwing at the problem, and earmark it for HOME and AUTO lending.
They can do that in one of three ways.
1. Give it to lenders ONLY FOR MAKING LOANS.
2. Create a Federal fund with it and allow lenders to draw against it to write loans.
3. Use it to insure all new loans lenders write for the next 24 months, meaning if a homeowner defaults the lender still gets paid.
Do just ONE of those three things, and watch our economy turn back on overnight.
Watch as millions of Americans start going back to work, as builders start building again, and as small businesses start hiring again, and as auto workers keep or regain their jobs… as realtors, title companies, home inspectors, termite inspectors, construction companies, cabinet makers, roofers, electricians, plumbers, HVAC techs, aluminum siding installers, carpet layers, flooring installers, tile installers, painters, drywall workers, stone masons, brick layers, chimney sweeps, electricians, and the manufacturers of all those materials that they work with and all the people that work for the factories making them, and all the trucking companies that deliver them, and the railroads that ship em, and the Home Depot cashiers that sell them.
And on and on and on and on.
The jobs are TOO NUMEROUS to fathom.
Why that’s so elusive a concept, I’ll never know.
But apparently it is, so I am spelling it out as clearly and as simply as I can put it.
1 in 8 US jobs depends on the Home Industry.
3 Million or more depend on the Auto Industry.
So unless we make loans available again to purchase these two products with, then these MILLIONS and MILLIONS of people, your friends, your neighbors, your loved ones, …will continue to lose their jobs.
And in doing so, lose their homes, adding to the crisis.
We need to get Congress to know that WE KNOW, that it wasn’t US, but it was THEM and the corrupt financial institutions that brought us here.
It wasn’t our not paying our debts. The statistics PROVE that.
It was THEM, lying about their losses and projected losses thanks to Dick Cheney deregulating their oversight.
Return wide scale lending.
Return oversight.
And everyone goes back to work.
February 21st, 2009 at 6:14 pmBuying into the Financial institutions NONSENSE about this being about “people borrowing above their means won’t work”.
What will work, is accepting the fact that the lenders LIED to and ABOUT you, blaming THEIR WOES on Americans not paying their mortgages when in fact at the time they were saying that a WHOPPING 99 percent of all Americans were PAYING their mortgages on time.
And over 98 percent are STILL paying them.
Those aren’t “my figures”. Those are from REALTY TRAC.
You know. The company everyone in the media has been producing figures from, without bothering to look at the ACTUAL year end totals.
Mortgage foreclosure rates in 2006 were at 0.48 PERCENT, or just under half a percent.
In 2007, that number doubled, and when it did, it was presented as “MORTGAGE FORECLOSURES DOUBLED!!!”.
But what they didn’t tell you, is that they only went up to 1 percent.
They focused on the glass being half empty, or in this case, being ONE PERCENT EMPTY,….INSTEAD of focusing on the fact the glass was NINETY NINE PERCENT FULL!
Then, mortgage defaults actually SLOWED in 2008, coming in at 1.84 percent.
Still climbing up there, but at a SLOWER PACE.
They didn’t focus on that though, instead they keep pumping into the media geographically isolated statistics, statistics from select down turned market areas and types, etc.
But they didn’t bother to tell you that the glass was still over NINETY EIGHT PERCENT FULL!
And the reason they did that was because they needed to convince you people that it was YOU not paying your bills that was the problem.
Instead of what the actual problem is, i.e. THEM lending outside of THEIR MEANS.
When Bush and Cheney opened up the Sub Prime market, that was fine.
But when they DEREGULATED LENDER OVERSIGHT, they opened a Pandora’s box, by permitting lenders to lend outside of their means.
So now, they have to sell the LIE, that it was US, and NOT THEM, who screwed up.
And most Americans are lapping it up like kittens to cream.
February 21st, 2009 at 6:25 pmIt should not be the governments [taxpayers] job the get bad assets off the banks books.
They took the risk, let them eat the debt.
I dont get to go to Vegas and gamble away billions, if not trillions, then get reimbursed for gambling as I walk out the casino door.
February 21st, 2009 at 8:45 pmYea, brilliant idea. Just brilliant.
Let the banks collapse.
Then when you’re standing in line with 5000 other people to see if you can get 50 cents on the dollar out of your lifes savings, you can have the glow of satisfaction in knowing that you “stuck it to them”, to keep you warm.
When you return to your cardboard box over a steam grate, with the rest of America.
Is there one thinking person left in this country?
Just one?
February 21st, 2009 at 9:20 pmThink about it.
Last year the fed gave the banks 350 BILLION dollars in the hopes of getting them to make home, auto and commercial loans available on a wide basis. Because they knew that if they didn’t, nothing else would get us out of this. Lending was the key as it still is.
But the banks didn’t lend the money. They hoarded it. Squandered it. And now, they’re asking for more and no one wants to give it to them because they didn’t lend it before.
But the reason they didn’t lend it before, was because Bush foolishly handed it to them without ANY STIPULATIONS to LEND.
And so they didn’t lend it.
DUH.
Now, rather than being smart about it, idiot analysts like Paul Krugman who is the biggest fear mongering doom and gloom spreader out there, (yet who for some reason is the hero of the left currently) are throwing out the baby with the bathwater and saying “SEE, didn’t work giving it to them we have to NATIONALIZE them”.
He’s throwing out the baby, which is funding lending, with the bathwater, which is giving banks those funds without stipulations to lend.
And now he wants to run for the lifeboats instead of actually trying to give the banks the money to restart lending hence restarting the economy but WITH STIPULATIONS that they LEND it.
And people are giving this guy awards?
Krugman is actually a smart guy, but for some reason he is not being smart. I won’t speculate why, but he knows lending must return. And he knows that 1 in 8 US jobs relies on the Housing industry, and the housing industry relies on LENDING.
He knows this, but he says something else.
Well, nationalizing the banks is the end of the system of government we’ve had for our entire lives.
Nationalizing the banks means the end of capitalism, and that sour note in history will be tagged onto the Democrats, and President Obama.
And it’s FOOLISHNESS.
And it looks like President Obama, is wise to it.
That’s why he’s saying NO.
Because we haven’t even tried to really plug the hole yet. And the hole is lending. President Obama, THANK GOD, seems to get this. And he’s trying to make it happen in SPITE of all the “good advice” he’s getting.
Run for the lifeboats is what you do when there’s nothing else to do, and nationalizing our banking system and giving up on capitalism is foolishness, when we haven’t exhausted our options, or for that matter, haven’t even exercised the most OBVIOUS option.
Give the money to the banks to lend, but ONLY to lend.
Give them 24 months to lend it out and then give em some more if they need it, but by then the interest revenues alone, coupled with MILLIONS and MILLIONS of Americans going back to work, will likely make that not necessary. They’ll have enough profits to carry on themselves again.
Its easy if we want it to be but our politics and our silly nonsense is getting in the way.
But it looks like President Obama isn’t going to be suckered by this ploy, and hopefully, he’ll inject lending capital into the banks, either directly or through a federal lending fund, and get us back on track.
February 21st, 2009 at 9:37 pm114 banks have gone under just this year. Nationalize the damn things. Someone said a couple of days ago,”if they nationalize the banks it will look to people like there is no confidence” Well duh,that’s because there isn’t any. See how that works?
Predatory capitalism in the financial markets have periodically done some of the worst cheating and greed known to man. And this has been the worst. The heads of all these banks and investing houses should be fired and jailed. They don’t know what they are doing, or worse, they do.
If our new administration is not brave enough or smart enough to do it, then by all means take all the banks over. Remember that quote in the Godfather? He said, “more money can be stolen with a briefcase then a gun.” Or words to that effect. And these kings of greed are a prime example. Signs should be put in the lobby of all banks and investment houses. STOP ME BEFORE I ROB AGAIN.
February 21st, 2009 at 9:38 pmBull.
You’re just spreading more nonsense.
Predatory lending is a lie. Its a catch phrase, like “War on Terror”.
It’s a lie and it implies we got here because people aren’t paying their mortgages. Which is a lie.
Go look at the actual default rates for mortgages over the last 3 years. Less than TWO PERCENT of American homes were in foreclosure in 2008.
More than NINETY EIGHT PERCENT of mortgages are good, which proves your “predatory lending” garbage is just nonsense.
I’m sure you’d love to see capitalism fail on the watch of the first black US President, but fortunately he’s smarter than you. And all of you who try to get him to run for the lifeboats when he hasn’t even injected lending capital into the banks yet, like FDR did.
OR Reagan did.
And it worked for them!
Our countries biggest problem right now, is panic and stupidity.
February 21st, 2009 at 9:47 pmHow about we try what’s been done the last two times, and inject LENDING capital into the banks?
FDR did it with his “banking holiday” where he built on Hoovers “Reconstruction Finance Corporation”.
Reagan did it with the failed savings and loans with his “RESOLUTION TRUST CORPORATION”.
So why are we talking about nationalizing the banks, when we haven’t even tried that yet?
February 21st, 2009 at 9:51 pmI’m sorry but we are in this position today because of the federal government. They made laws and these banks didn’t follow them, so then they give them money to save the crooked banks? Let them fail and give the people the money we lost instead. Same with the car co. It’s a joke. If banks are nationalized we are all in big trouble, see USSR history circa 1981. Let the bad companies die so that good ones will grow. And by the way Dems and Reps are all the same- crooks in suits. Reserve the power to the states!!!
February 21st, 2009 at 10:58 pmWell I’m sorry your statement makes no sense, and is a contradiction in terms. On the one hand you state its the governments fault.
Then in the next breath you say its the banks fault.
Then of course, like most people out there who haven’t a clue, you declare, “let the banks fail”.
And then you state they should “give us the money”.
Where exactly will this “money” be coming from? And once we have it, and there’s no more, what then?
You haven’t a clue how capitalism works that is obvious. Most people don’t. But if you’d bother to read what I wrote, I explained what happened here, and how it is the government and the banks fault here, not ours, so why should we suffer?
This has happened before, but fortunately our fathers and their fathers weren’t as stupid as us.
When you’re standing in line, waiting to see if you can get 35 cents on the dollar out of your lifes savings, you like every other person out there who doesn’t have a clue, I hope you find comfort in your petty vengeance in “sticking it” to the banks.
What we need to do is be at least as smart as our fathers, and inject LENDING capital into the banks.
FDR did it with his “banking holiday” where he built on Hoovers “Reconstruction Finance Corporation”.
Reagan did it with the failed savings and loans with his “RESOLUTION TRUST CORPORATION”.
And it worked both times. Especially in the 80’s, when our economy was large enough to rebound quickly from stimulus.
We are primed right now for two things.
One, we can collapse in economic meltdown.
Two, we can turn this economy around by Christmas if we begin injecting LENDING capital to the banks, and RETURN FEDERAL OVERSIGHT.
Unfortunately, most of the country has been reduced to a bunch of mindless emotional dolts, who are more concerned with revenge and talking tough, then they are about actually solving the problem.
Letting the banks fail is not an option, and I don’t want to live in a country where people are so stupid, that they think that it is.
February 21st, 2009 at 11:45 pmAt least some people get it. Greed was the cause of this.
But not “greedy borrowers borrowing outside of their means” as the banks and Congress and many of the financial “experts” out there are telling us.
It’s was the greedy banks and the stupid Bush administration who caused this by deregulating to the point of removing federal oversight of mortgage lenders at the same time they were opening up the Sub Prime markets.
The banks now had more programs to work with, and less oversight to keep them in check. So naturally they underestimated their losses, over valued their Sub Prime notes and in many cases rolled them in with their prime notes devaluing the mortgage securities backed by them. Which of course when the higher rate of loss occurred which was inevitable given the higher risk loans the default rate surprised investors and they pulled their money out of US mortgage backed securities.
See the problem wasn’t the Sub Prime market. Higher risk loans simply mean higher banks need to price accordingly and maintain sufficient reserve capital to cover the increased default rates. It works fine as long as lenders don’t underestimate losses, nor LIE and CHEAT by rolling Sub Prime notes in with the Primes.
But that’s what they did.
Then, when Countrywide collapsed in fall of 07 Congress either purposely or a knee jerk reaction I’m not sure, but for whatever reason they effectively froze lending by threatening lenders with investigations, crackdowns, and declarations like “the era of easy credit is over”.
What they thought would happen at that point I’m not sure, but it could only produce one result.
Economic collapse.
Alan Greenspan for all the flak he’s taking warned us over and over not to let the housing markets falter. He even wrote about it in his book. He told us the economy was “propped up” by the housing market and if we let that founder, our economy would collapse.
And he was right.
As soon as lending froze, the economy unraveled and the jobs hemorrhaging began. After all, a whopping ONE IN EIGHT US jobs rely on the housing market! Once that faltered the jobs that rely on it began disappearing at alarming rates. Which in turn mean more people unable to meet their obligations, hence more foreclosures.
And now, lenders, caught in the act of effectively inflating securities values and lending outside of their means, want to push the onus for the problem back onto us. The average American.
Lenders (and their friends in congress propped up by paid financial “experts”) will tell you that we were the problem.
That we don’t pay our bills.
That’s why lenders collapsed. Because we’re borrowing over our means. Which is a lie and the facts prove its a lie.
Realty Trac’s own foreclosure figures prove that American’s WERE paying their mortgages. And still are. In fact over 98 percent of all mortgages are current!
But they don’t tell you that on the 5:00 news, or on HARDBALL.
They’re to busy spreading misinformation and panic.
The facts are Americans were and are meeting their obligations and lenders just didn’t properly manage their funds and now they want not only bailouts, but to shirk the blame too, buy falsely accusing us of being at fault.
Don’t let them.
Call, write or email your congressmen and tell them that they need to inject capital back into the banks for the SOLE PURPOSE OF LENDING. If they do that, the housing markets will return, and bringing millions and millions of jobs and lots of production with it.
February 22nd, 2009 at 1:08 amCG Says: 36
WOW. You do understand you are an ignorant punk and a worthless piece of garbage dont you? I thought we had already scraped the bottom of the barrel. I thought the trolls we already had were the stupidest people imaginable. I cant BELIEVE you came along to show that yes, there ARE stupider people out there. I should thank you. Every now and then I think I have plumbed the depths of the well of human stupidity. I am glad you came along to show me that yes indeed that well is bottomless.
February 22nd, 2009 at 6:14 amWayneboro,
Interesting comments. H.L. Menkin said:
For every complex problem, there is a solution that is simple, neat,
and wrong.
In this case, I hope you are right, and Menkin was wrong.
If the Govt. Nationalizes the Banks…then the Govt. would be in the Driver’s Seat, and could then start loaning money as they saw fit. What’s the downside of that, except that investors in Financial Stocks would take a Loss.
These investors made out quite well when the bubble was growing.
And I think the Resolution Trust Corp. was established in 1989…under George H.W. Bush, and not Reagan. The problem it was created to fix , however, was begun during the Reagan Presidency.
And finally, there’s the chicken and egg Problem. Why would Banks lend to people who have just lost their jobs?
February 22nd, 2009 at 8:30 amBadger Says:
Wayneboro,
Interesting comments. H.L. Menkin said:
For every complex problem, there is a solution that is simple, neat,
and wrong.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
I think Menken is right and also that the GOP specializes in EXACTLY those solutions.
February 22nd, 2009 at 9:19 amThe nationalization of a bank need not be a permanent,the government was trying to avoid that.
February 22nd, 2009 at 9:34 amThere IS a ‘plan B’ – and plans C – Z. And most likely ALL of them are better than what we have now. You just won’t hear about them from the bankers running everyone’s governments or their lapdog press.
Check out the updated version of the Chicago Plan at the American Monetary Institute – http://www.monetary.org/chicagoplan.html. The original plan was written by a group of bomb-throwing radicals including the famous Yale economist Irving Fisher. See his “100% Money”.
Fisher not only believed the Chicago Plan would be in the long term best interests of bankers (and the populous at large, of course. But who cares about them?) He (Fisher) was also an admirer of the recently deceased – approx. 1933 -NY Federal Reserve governor Benjamin Strong. Strong ruled the Fed in the run-up to the Great Depression. But Fisher believed if Strong had lived, he would have reversed courses in time.
The stuff that caused the current economic crisis has been going on for a long, long time. See Frederick Soddy’s “Wealth, Virtual Wealth & Debt” and “The Role of Money”, 1926 and 1934 respectively.
February 22nd, 2009 at 1:57 pmGood comments Badger. And you raise some valid questions.
First, I cannot deny your statement that if the Government nationalized the banks they could start lending immediately.
I merely disagree, as does President Obama, that we need to go that far just to get lending going again. Nationalization means our capitalism experiment failed. Russia would never let us live that down. Even if we did eventually sell the banks back to private ownership, it would be forever recorded in history that America slipped into socialism under the watch of a democratic president. And the first Black one at that. Not a great legacy for President Obama in his first 2 months in office. But I don’t disagree with the mechanics there, just in that that is our only option. Its not.
As for the Resolution Trust Corporation we had two Presidents in 1989.Reagan was on his way out and Bush was on his way in. And while the RTC could be called Bush’s baby, really it was an an extension of the 1987 FSLIC Recapitalization Bill. The Bill pumped 10.8 Billion into the Savings and Loans cleanup but did not go far enough to solve the problem. But it was the right way to go. In 1989 Congress established the Financial Institutions Reform, Recovery, and Enforcement Act, (FIRREA) and injected larger sums until finally injecting enough capital to clean up the problem. The RTC grew out of FIRREA, but the foundations for it, (1987 FSLIC Recapitalization Bill) came from Reagan’s watch, as did the S&L crisis itself. But you are correct that it was actually passed into law a few months later under George H W Bush’s term. But Reagan’s administration under Paul Volker, built the foundations for it. In fact, Bush was still swearing in Treasury officials during its creation, and Treasury Secretary Brady pushed for a small vehicle with a limited role, with undersecretary nominee Robert Glauber still in confirmation hearings was already trying to scale it back calling for less than 100 employees to manage the entity, but eventually they realized that it would not be a small move like Reagan’s initial attempts and the RTC grew to the size where it was effective at cleaning up and disposing of failed S and L’s. The important thing of course is that they didn’t just walk away at the end, but managed the collapse of certain institutions while bailing out others, and they did it without nationalizing the S and L’s.
Lending was the key then and they continued to inject capital until lending returned. Of course it didn’t hurt that the technology boom began shortly thereafter, helping wash away any remaining messes by creating wealth across the board.
As for the “chicken and the egg” problem, they wouldn’t.
Lending to people without jobs is not something I would suggest nor did I. Most American’s still have jobs however, with a small percentage being currently unemployed. A rapidly growing percentage, no doubt. But still a tiny fraction of the overall working population. Thus there are ample Americans looking to buy and sell, and THAT is what stimulates growth.
If President Obama and congress created a vehicle to inject lending capital, and ONLY lending capital into the more stable banks, help collapse the unstable ones while redistributing their assets much like the RTC did, then we’d see a resurgence of jobs and economic growth almost overnight. The housing market which was propping up our economy would do so again, being responsible for a whopping 1 in 8 US jobs. This would stabilize our economy and give us the luxury of having the time to correct other problems that people are looking at now.
So the lending needs to return first. Home and auto lending. Otherwise we will always be applying first aid, and never actually getting to the other areas or preventive maintenance needed to make sure we don’t end up here again.
As I said earlier this is a ship with a hole in the hull, and we first have to plug the hole, and the hole is lending. Then we can worry about rebuilding the ship. Once its safely on shore and the passengers are off.
The time to rebuild the ship, is not in the middle of the ocean.
February 22nd, 2009 at 2:40 pmIn fact, just a few months ago Paul Volker and Nicholas Brady (Bush’s Treasury Secretary) wrote an article in the Wall Street Journal calling for bringing back the Resolution Trust Corporation or similar entity to buy up failed institutions and restructure debt, cover losses and manage mortgages that are failing to keep further problems from happening.
From the article:
This was advice Bush should have listened to and I am hoping the sort of advice President Obama will be listening to.
In fact, in his spirit of Bi-Partisanship it would make sense for him to consult Brady and Volker, and others. I’m not saying do everything they say, but they do have keen insights into this problem and they oversaw a successful return from the edge.
Whatever they do, and however they do it will ultimately involve liquidating some financial institutions (not just letting them fail), restructuring others and most importantly, injecting LENDING capital back into the system in order to turn back on the job markets. The Housing market propped up our economy throughout the reign of George W Bush, until it collapsed in 2007 when lending was frozen.
Restart lending and we prop up the economy again, meaning people go back to work, and the hemorrhaging stops long enough to do the sort of rebuilding and such people are talking about.
Once we get this ship safely to shore then we can talk about core changes, but rebuilding the ship in the middle of the ocean is not an option. Not a sane one at least. And getting this ship to shore means stopping the hemorrhaging and the only way to do that is to turn back on lending. And the only way to turn on lending is the injection of lending capital back into the banks.
We haven’t even tried that yet and here we are talking about nationalization.
We should at least try what worked before, before throwing out the baby with the bathwater.
February 22nd, 2009 at 3:02 pmFebruary 22nd, 2009 at 3:32 pm
And if everything I’ve written still isn’t enough to convince you that this plan is the way out, consider this.
George W Bush, rejected it.
February 22nd, 2009 at 4:20 pmWaynebro,
Paul Krugman said on ABC that the Govt. had ALREADY Nationalized several Banks. But they were small ones, not the Big (and possibly Insolvent) Investment Banks.
They Used the FDIC to take over these smaller Banks, but are Prohibited (thanks to Sen. Gramm and Deregulation laws) from doing the same to these Big Investment Banks.
And have you read Frank Rich today??
http://www.nytimes.com/2009/02/22/opinion/22rich.html?_r=1
from the column:
The reason why the White House has been punting on the new installment of the bank rescue is not that the much-maligned Treasury secretary, Timothy Geithner, is incapable of getting his act together. What’s slowing the works are the huge political questions at stake, many of them with consequences potentially as toxic as the banks’ assets.
Will Obama concede aloud that some of our “too big to fail” banks have, in essence, already failed? If so, what will he do about it? What will it cost? And, most important, who will pay? No one knows the sum of the American banks’ losses, but the economist Nouriel Roubini, who has gotten much right about this crash, puts it at $1.8 trillion. That doesn’t count any defaults still to come on what had been considered “good” mortgages and myriad other debt, whether from auto loans or credit cards.
I think Mr. Rich would agree with you that this is a POLITICAL problem for Obama, as well as a Financial Problem.
February 22nd, 2009 at 4:50 pmDon’t get me started on Paul Krugman. Krugman is busy receiving accolades for doing nothing other than spreading panic without solutions. He is part of the problem from where I sit.
As for Frank Rich, yes, Rich is right. It is a political problem for President Obama and its clear there are forces at work here designed to perpetuate the crisis and back President Obama into a corner where he may do something drastic and overreaching like nationalizing the banking system.
As for the smaller banks being nationalized already Krugman knows that’s just not true. He’s playing with words and being liberal with the term. That the government comes in and manages some failing financial institutions to a degree is something that’s been done before and has its foundations in the FDIC, RTC, RFC, FSLIC, FIRREA, etc. But we haven’t nationalized the banking system, and that’s whats being put on the table.
Government regulation and oversight, particularly intermediate help during a crisis of failing financial institutions is standard, and Krugman knows this but for some reason he is presenting it disingenuously and thus spreading more panic and fear.
After all talk of nationalizing the banks is the last step to creating a full economic meltdown. If Krugman was so smart he wouldn’t be doing the one thing ensured to put the final nail in the coffin, and causing investors to flee on a massive scale, thus ensuring financial collapse of the banking system.
Krugman needs to go play with his medals, and stop inciting further panic. He and those like him have done enough damage to this crisis already. We need level heads right now and Krugman is just not one of them.
February 22nd, 2009 at 5:18 pmIf you want to call liquidation and asset management, restructuring and injection of capital “nationalizing the banks” we can, but we would be wrong.
And this talk about banks being insolvent is just more panic and hype. Banks historically have functioned with a deficit and as long as depositors can access their funds they are not insolvent.
People like Krugman are creating panic, further fueling the crisis, for what reason I do not know. But they are not helping the problem, they are exasperating it.
Level heads like Clinton’s Comptroller Eugene Ludwig and Nick Brady are offering TIME PROVEN METHODS for dealing with this problem but no ones listening.
They offered these methods to Bush, and he rejected them.
I am hoping people will stop listening to the fear and panic hype being spread by the likes of Paul Krugman, and start listening to the older, wiser heads of men who have been there before, and brought our ship safely to shore.
All we have to do is resurrect the RTC, or create a similar entity to restructure debt, inject lending capital and manage liquidation and restructuring of failing financial institutions.
We’ve done it before, and we can do it again.
Or we can succumb to the fear and panic mongering of media hounds like Paul Krugman.
February 22nd, 2009 at 5:26 pmHere, let me say that again.
Level heads like Clinton’s former Comptroller Eugene Ludwig and Nicholas Brady who navigated the successful resolution of the S&L crisis are offering TIME PROVEN METHODS for dealing with this problem.
But unfortunately thanks to fear mongers like Paul Krugman, no ones listening.
February 22nd, 2009 at 5:32 pmA lot of people seem to lose sight of the fact that we have already nationalized several banks. Washington Mutual’s assets were seized by the federal government last year and sold to Chase. IndyMac’s assets were seized by the government and the bank is currently being operated by officers appointed by the FDIC. The question is not whether we should nationalize banks, but whether we should nationalize more banks. Call it what you want, but the shareholders in these banks lost their entire investment and representative of the federal government controlled the assets of the banks.
February 22nd, 2009 at 7:50 pmUmm, Wayne, saying George W Bush rejected a plan is one of the surest ways to make me reconsider it. I would sooner take financial advice from a hobo than from that idiot.
February 22nd, 2009 at 7:52 pmNo, a lot of people seem to be confusing federal liquidation and restructuring, something that has been done for the last 100 years or more, with “nationalization of the banks”.
The creation of the RTC, RFC, FDIC, FSLIC, FIRREA, all involved federally controlled liquidations and restructuring, but it wasn’t “nationalizing the banks”.
Don’t let Paul Krugman trip you up with his fear mongering and misrepresentation. He’s playing word games now, and the fed stepping into control failed financial institutions is NOT nationalizing the banking system.
February 22nd, 2009 at 8:32 pmUmmm, Fletch, getting you to reconsider the plan is why I said it.
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