Clive Crook says that even though people admire Barack Obama’s temperamental moderation, he actually needs to get more radical. He proposed bank nationalization:
The government must coldly examine the banks’ assets and urgently come to a new reckoning. There is more than one way to proceed, but the key thing is that banks must be forced to write down their toxic assets — not to “fair value,” whatever that means, but all the way to what they are now worth in the market. This will make many banks insolvent. The best course then is to nationalize them. Even the ones that stay solvent will likely need the government to supply further new capital in exchange for equity.
All told, this could be enormously expensive — another trillion dollars and up — but at least taxpayers will have paid no more for their resulting ownership of the banks than the institutions are worth. The principal losers will be the banks’ previous owners, which is right. This unequivocating clear-out of the banks’ balance sheets would create the basis for new lending and a stronger economic recovery.
He also makes a persuasive case that tax cuts need to be a substantial portion of the stimulus package, but that’s already what Obama’s proposing to do.