If we're going to nationalize the banks, isn't that the right way to do it? Why shouldn't paying your mortgage, or your auto loan, or your student loan, be exactly like paying your light bill? None of those businesses should be hard, and none of them demand "complex," "innovative," "financial instruments," and they certainly don't require testesterone-driven Merry Banksters sucking enormous bonuses off the company tit. So cut the parasites out of the business and get back to basics.
Anyhow, here's how Bloomberg covers Krugman's column calling for bank nationalization today:
President Barack Obama shouldn’t hesitate to nationalize the banks that need to be bailed out, Noble Prize-winning economist Paul Krugman said.
“If taxpayers are footing the bill for rescuing the banks, why shouldn’t they get ownership, at least until private buyers can be found?” Krugman wrote in a column in the New York Times published today.
Simple answers to simple questions:
Because they're not "entitled" to it!
“But the Obama administration appears to be tying itself in knots to avoid this outcome.”
Quelle surprise. I mean, since Obama whipped the caucus for TARP, which handed $700 billion dollars to the banks with no transparency and no accountability, why would anybody expect Obama to turn 180 degrees to nationalization?
His remarks echo those of [fellow DFHs
and Cassandras] Nassim Nicholas Taleb and Nouriel Roubini, who said last week that nationalizations will be necessary to bring the U.S. banking system out of insolvency. Obama will require banks to bolster lending in return for government aid, lawmaker Barney Frank said yesterday, stopping short of taking full ownership.
Krugman said the U.S. government’s rescue plan appears to put banking risk with taxpayers when loans go bad while giving the rewards to executives and shareholders when things go well.
And he says that like it's a bad thing!
Treasury Secretary Timothy Geithner said on Jan. 28 that U.S. officials will “do our best” to preserve the banking system run by private shareholders.
Why? I thought the Obama administration was about pragmatism, not ideology?
Our financial system seems to me like the famous analysis of the Russian auto industry: It would have been better to leave the raw materials as steel, rubber, plastic and so forth -- because the Russian auto industry actually subtracted value from its inputs. The whole goal of the Conservative Movement over the last thirty years can be summed up in one sentence: "Cheap labor slaving for Big Money." Well, that's not working (at least not for us). So why try to preserve it? Why not get rid of it? It's subtracting value, not adding it.
NOTE One more advantage: Regulated public utilities tend not to fail, unless the privatizers get in and screw them up, and when they do, they're small enough to.
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My "Why Will Obama Fail" comment perhaps fits better here--
LINK.
I think this Obama Simulus bill may be the making or breaking of the Obama presidency. Unfortunately, if he goes down, so do we and the Democratic Party.
High stakes, but, according to Cokie Roberts, discussing the negotiations over the Obama Stimulus bill, Obama seemed "so serene" during his pre-SuperBowl interview yesterday (which I missed). Her emphasis on "serene" almost seemed to be the commentary. Too cool by half..?
And now, off to chip ice while the sun shines, the temperature is nearing 40, and before a possible new snow/ice storm.
Krugman is correct as always
Shouldn't leave Joe Stiglitz out of the group that doesn't like the "bad bank" ripoff. He says it's cash for trash.
Lambert - did you happen to catch This Week on ABC?
Bob Woodward was on the panel and he said almost verbatim, "Banks are like electricity, and plumbing, and water and sewer. It's got to function and the banking system is truly in danger."
I couldn't find a transcript of this section on their site so I transcribed from the video segment they have there. "Roundtable: Economic woes"
If someone as dull and dimwitted* as Woodward can get the essential point of banks being utilities, then what's stopping this notion from catching fire with other opinion makers? I'm sure there's a SATSQ for that one.
He said it almost like he didn't realize the import of what he was saying, that banks aren't any more special than any utility but a functioning system is vital. Hence - make them regulated (key word *regulated*) utilities where everyone has a right to access.
*NOTE: Not to say you're dimwitted as I completely agree with the idea. However, I can't stand Woodward and think he's about as obtuse as is possible.
An idea whose time has come!
It's just that the bankers want to be paid like emperors for doing the work of clerks. They were supposed to be all about being able to assess risk, but that idea went down the tubes, didn't it?
First they ignore you, then they ridicule you, then they fight you, then you win. -- Mahatma Gandhi
Cal'd Risk:NYTimes article on difficulty of pricing toxic assets
Underlines difficulty. David Cay Johnston mentioned this article on his appearance on Democracy Now today, as well.
The Times gives this example of one asset, which is based on second mortgages with no money down and was rated AAA:
Then, just a bit further down, CR notes a report about the price of a house in CA--sold for $149K in 1999, then for $420K in 2006, with no downpayment. Went into foreclosure and sold for $130K in November of 2008--less than the 1999 price.
Wowser.
Both interesting and brief. Links at CR.