Yes, that’s what I said. I’ll say it again:
It’s time to nationalize the banks.
I say that as a die hard libertarian with impeccable free market credentials.
Even at this point, my preference would be to let bad companies fail. But, our “leaders” in Washington have made it clear that they’re not going to let that happen. They’re going to prop up the failing companies, and the core problems will not be solved.
Essentially, we have two problems right now.
The first is a complete lack of faith in our economic system by significant parts of those in the system. This is a problem that has frankly been caused by the Feds and their helter-skelter approach to the problem.
The second is a pricing problem. There are a huge number of over-priced assets (namely, houses) on the books of these banks.
Together, these are like a toilet that is clogged. The Feds, in all their wisdom, are trying to clear the clog out by throwing more water into the toilet.
Unfortunately, this doesn’t clear out the clog, and you eventually end up with turds all over your floor.
Since the Feds won’t let the clog work itself out by allowing banks (and other poorly managed companies) to fail, the best move is for the U.S. to nationalize its problem banks. They would combine the toxic assets into a single bank (a so called “bad bank”) and sell the bad bank on the private market at a steep discount. The remaining “good banks” would be sold off at market prices.
The Swedes did this in the 1990’s.
Yes, the stock-holders of the banks take a real hit with this approach, but they’re supposed to when the companies they are holding have behaved stupidly.
What won’t work is the inconsistent half-measures we’re currently taking. Any banks with problems must be nationalized and fixed. Any banks that don’t sign onto this plan are on their own. I’d even support the full nationalization of all US banks over what we’re doing now.
Do this, and then stop with the inane “stimulus packages”, that even the non-partisan Congressional Budget Office says will hurt more than it will help.