Nick Kristof, who got to watch Japan be devoured by zombie banks first hand in the nineties, has an excellent column about the non-technical aspects of the banking situation. As he says “the larger conundrum is that a bailout is both: A) urgent and essential; and B) unfair and unpopular.” Thus far, officials have attempted to resolve that conundrum with timidity, but ultimately that results in measures that fail on both counts. What’s needed is more boldness — really decisive action to clean up the financial sector combined with measures that are tough enough on CEOs and shareholders to give the effort political legitimacy. He also has a neat idea for bringing bank nationalization closer into line with American norms:
Mr. Obama then suggested that it wouldn’t work in the United States, partly for cultural reasons. But a broad range of experts believe that some variation of nationalization is the only way to revive the banks quickly without squandering vast amounts of taxpayer dollars. Even the managing director of the International Monetary Fund suggested that Washington think of the Swedish model.
America’s horror of “nationalization” could be defused by handing out shares to all American households. President Bush used to talk about building an “ownership society.” Well, giving shares in big banks to all American households would be a terrific way to do that.
Admittedly, the Managing Director of the IMF is French Socialist (albeit from the PS’s moderate wing) Dominique Strauss-Kahn so I don’t think the “even” in “even the managing director…” really does a ton of work on the merits. Still, DSK is a smart guy! And he’s not the only one.