Nationalize the Banks:

[debbierlus]

One Treasury official after another is doing somersaults on a wire to distract us from the obvious: We need to nationalize many of the banks, not save them as private entities.

The banks got us into this financial mess in the first place by making unwise home loans and by speculating in unregulated credit-default swaps tied to those loans. They have taken the entire world economy down with them. They don’t deserve to be bailed out.

If our government really believed in free enterprise, these banks would be out of business right now.

Instead, first the Bush Administration and now the Obama Administration have decided to act like an iron lung for the banks, pumping hundreds of billions of dollars into them to keep them alive.

There is no reason to do that.

And it would have been cheaper to buy them outright.

“The day we gave Citigroup their second infusion we could have bought them for the same $20 billion,” says economist Dean Baker. “On top of that, we guaranteed $300 billion of assets. We could have bought Citigroup several times over.”

Still, the banks aren’t solvent. Baker estimates that the losses on most of their balance sheets outweigh their capital. This is a recipe for indefinite bailouts.

Nobel Prize-winner in economics Joseph Stiglitz also sees the irrationality of leaving the banks in private hands.

“In effect, the American taxpayers are the major provider of finance to the banks,” he wrote on CNN’s website. “In some cases, the value of our equity injection, guarantees, and other forms of assistance dwarfs the value of the ‘private’ sector’s equity contribution. Yet we have no voice in how the banks are run.”

FULL ARTICLE:

http://www.progressive.org/mag/wx021109.html

[Seedersandleechers]

1. Yes nationalize the banks

and then the oil companies.

[flpoljunkie]

2. More from Dean Baker: The TARP Dog and Pony Show

The TARP Dog and Pony Show

With no clear strategy, the new bank-rescue plan offers only more uncertainty.

DEAN BAKER | February 11, 2009

This brings us to the other program that Geithner only vaguely outlined. He said that he wanted to partner with private firms to arrange for purchases of the banks' bad assets. The Treasury would provide guarantees that would limit the losses that private firms would incur, as it has done with hundreds of billions of assets held by Citigroup, J.P. Morgan, and Bank of America.

In principle, government guarantees could make bad assets attractive to private investors. The problem is that the guarantees are in effect a subsidy to the banks, since they add an enormous amount of value to their assets. It may be difficult to know the full extent of the subsidy, since many of the prospective buyers of the banks' junk are likely to be private-equity funds and hedge funds, both of whom have very little by way of disclosure requirements.

Fortunately, we don't have to follow the individual trades to know whether the taxpayers are being ripped off. We just need to ask some more basic questions like "How much will this thing cost?" If the answer is anywhere much more than zero -- as Geithner suggested it will be -- and we still see that bank stocks carry significant value and bank executives continue to hold on to their high-paying jobs, then we will know that we have been had.

The basic point is extremely simple. We have a large number of bankrupt banks. We have a public interest in keeping the banks functioning, but we have zero public interest in giving taxpayer dollars to bank shareholders or to the executives that wrecked the banks they ran.

Geithner can design as complex a dog and pony show as he wants, but if his plan takes up hundreds of billions of taxpayer dollars and does not involve wiping out the shareholders and sending the bank executives packing, then he has ripped us off.

Chalk it up to business as usual.

http://prospect.org/cs/articles?article=the_tarp_dog_and_pony_show

[leftstreet]

3. K&R

[Fovea]

4. K&R

And we should have done it in 2008.

[cilla4progress]

5. Lobbying suggestions?

Any suggestions on best ways to lobby for this? Do you know if any organizations have crafted blast emails with articulate provisions lobbying for bank nationalization, to send to our delegations?

(I sent them emails pushing for the stimulus...now I'm rethinking my position and wishing I would have included language urging nationalization.)

[Parker CA]

6. **Questions** How many banks are there in the US that would become Nationalized?

How would smaller banks that are completely solvent be affected?

How long would it take to make such a transition?

What percentage of total banks currently in operation would exist after the Government Nationalized the industry?

I've clearly not read extensively on these issues, but from Obama's interview with Nightline the other night, his brief comments alluded to the fact that there are far too many banks that would require too many resources and oversight to realistically Nationalize them. He was comparing to Sweden, who, at the time of their decision to Nationalize the banks had a tiny percentage of the banks we have.

How realistic is the idea of Nationalizing banks, and how bad will things have to become before serious thought is given to really entertaining the concept on a presidential level?

[ozymandius]

8. All good questions.

There is a discussion started yesterday where you can find many of your issues addressed.

As for your transition question: FDR did it in four days.

[Parker CA]

9. Thanks, Ozy, I'm going to check it out now.

[girl gone mad]

7. Nationalize them, kick out the management, wipe out the shareholders,

claw back the ill-gotten bonuses. It's not that complicated and only requires a modicum of political will. The public would certainly be behind it.

[dkofos]

10. Especially if it works.

[Abq_Sarah]

13. I'm thinking

You wouldn't be so hot on the idea if your 401K had financial stocks.

[WillyT]

11. Yep... K & R !!!

:kick:

[debbierlus]

12. In order to do this guys, we have to let Obama & Congress here our voices.

LOUDLY!

[TexasObserver]

14. No, don't nationalize banks. But do let the big ones in trouble fail.

I prefer this process:

1. A bank that cannot meet its obligations fails.

2. Its ownership and management are let go.

3. Its good assets and rank and file workers quickly go to work for a newly created bank, but in my scenario, the buyers of such banks are sound financial institutions - banks, savings & loans, credit unions, etc.

4. The bad assets get dumped into a big pile, and the process of dealing with them begins, with the government creating an entity to deal with them.

We punish the stockholders, directors and officers of the big banks that fail. We do not reward them or allow them to stay in position. We reward financial institutions that have performed well in declining times, because this indicates they have been wise.

The reason we shouldn't nationalize the banks is because having the government control our banking system through ownership is a disaster waiting to happen. In the hands of a George Bush or Dick Cheney, no one would be safe from their investigation or wrath.