Nobel economist Joseph Stiglitz: Nationalized Banks Are "Only Answer,"

[RedEarth]

Joseph Stiglitz was awarded the Nobel Prize in economics in 2001. Under US President Bill Clinton he served as chairman of the Council of Economic Advisers from 1995- 1997. He was chief economist of the World Bank from 1997-2000 and was a lead author of the 1995 Report of the Intergovernmental Panel on Climate Change, which shared the 2007 Nobel Peace Prize. He is currently a professor at Columbia University in New York.

DW-WORLD: Many experts fear that while things are bad now, we haven't seen the worst of the crisis yet. Do you share the belief that we are facing a long decline that could rival the great depression?

Joseph Stiglitz: We live in a very different world than during the Great Depression. Then, we had a manufacturing economy. Now we have a service-sector economy. Many people in the in the United States are already working part time because they can't get full-time jobs. People are talking more about the 'comprehensive' measures of unemployment, and these show unemployment at very high levels, around 15 percent. So it clearly is a serious downturn.

Another big difference between now and the Great Depression is then we didn't have a safety net. Now we have unemployment insurance.

Economists Nouriel Roubini and Nassim Taleb, who predicted the global economic downturn, have called for a nationalization of banks in order to stop the financial meltdown. Do you agree?

The fact of the matter is, the banks are in very bad shape. The U.S. government has poured in hundreds of billions of dollars to very little effect. It is very clear that the banks have failed. American citizens have become majority owners in a very large number of the major banks. But they have no control. Any system where there is a separation of ownership and control is a recipe for disaster.

Nationalization is the only answer. These banks are effectively bankrupt.

http://www.dw-world.de/dw/article/0,,4005355,00.html

[Doctor Cynic]

1. The sooner they realize this, the better.

Nationalize them. Tell shareholders to eat shit.

Create a bad bank. Over the years, manage them to wring every last possible dime out of them.

Banks start lending them.

Resell the shares on the market.

Profit.

[Donnachaidh]

2. and nationalize the FEDERAL RESERVE

Stop letting the Fox guard the henhouse.

[Joanne98]

3. I second that

[Beam Me Up]

6. Third

[LeftHandPath]

4. Why nationalize bankrupt companies?

This is why we have the bankruptcy laws, and they actually work very well.

Let the insolvent banks default, and let those who made the bad bets on these criminals suffer the punishment of free markets.

There are plenty of banks in this country. We dont need Citigroup, Goldman's Sak, BoA, JPM, or any of the other insolvent Primary Dealers.

Why do tax payers need to take these losses? Let the banks fail, and let the chips fall where they may.

Otherwise, they are going to do the exact same thing again, and our problems will only get worse.

[Hydra]

5. The fact that the banks are taking our money and still screwing around is great

Because I'm a great believer that the country should control the money. More labor available? Make more money available. We don't have a labor or demand shortage, we have a money shortage.

[Warpy]

7. I'm afraid he's correct in the short term

because throwing money at them to shore up their balance sheets is going to turn into a black hole. Nationalizing them would be expensive but would allow them to stay open and operating with massive oversight while they struggled to regain enough assets to be legal banks.

That's fine but provisions have to be made to make them private institutions in the long term when their balance sheets have been purged of funny hedge fund paper and other derivatives and once again resemble reality.

Trading in their stock would be suspended for the duration of the government takeover. Bank stock would be an inert item in a portfolio, generating nothing and costing nothing in terms of taxes until the bank once again became solvent enough to stay open as a private institution.

The Fed, Fannie and Freddie need to stay nationalized as they require permanent oversight.

[NMDemDist2]

8. I just need to tell you Warpy, once again

how much I enjoy your posts

your ability to cut right to the core of a situation, often with most excellently funny snark, continues to make me read every post of yours I run across the a sense of anticipation and then and slow head nod as the crystal clarity of your reasoning brings into focus what had been a nebulous stirring of an idea in my mind.


thank you!

:loveya:

[roamer65]

9. Roubini is right.

The large banks need to be nationalized.
However, many smaller banks are still very solvent, as they early on sold off most of their questionable mortgages and didn't play around in the credit derivaties markets. These banks should remain unnationalized and could serve as competition to the larger national bank, along with credit unions.

[Warpy]

10. Agreed. Any bank with legal asset to debt ratio should stay open

and in private hands for the duration.

Any bank that is insolvent should be nationalized until it is either sold to a solvent bank or becomes solvent through sound banking practices.

[autorank]

11. It's tinme

The "rulers" need to get busy and do this. But they won't, so we have to insist that they act on
this crisis before the full fiction of our system is known and we're in chaos.

[Festivito]

12. NOW, now that the profits are gone, WE take the bank.

I say we take the bank and the past profits.