WaPo op ed: Nationalize the Banks! We're all Swedes Now

[deminks]

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/12/AR2009021201602.html

The U.S. banking system is close to being insolvent, and unless we want to become like Japan in the 1990s -- or the United States in the 1930s -- the only way to save it is to nationalize it.

As free-market economists teaching at a business school in the heart of the world's financial capital, we feel downright blasphemous proposing an all-out government takeover of the banking system. But the U.S. financial system has reached such a dangerous tipping point that little choice remains. And while Treasury Secretary Timothy Geithner's recent plan to save it has many of the right elements, it's basically too late.

The subprime mortgage mess alone does not force our hand; the $1.2 trillion it involves is just the beginning of the problem. Another $7 trillion -- including commercial real estate loans, consumer credit-card debt and high-yield bonds and leveraged loans -- is at risk of losing much of its value. Then there are trillions more in high-grade corporate bonds and loans and jumbo prime mortgages, whose worth will also drop precipitously as the recession deepens and more firms and households default on their loans and mortgages.

Last year we predicted that losses by U.S. financial institutions would hit $1 trillion and possibly go as high as $2 trillion. We were accused of exaggerating. But since then, write-downs by U.S. banks have passed the $1 trillion mark, and now institutions such as the International Monetary Fund and Goldman Sachs predict losses of more than $2 trillion.

But if you think that $2 trillion is high, consider our latest estimates at the financial Web site RGE Monitor: They suggest that total losses on loans made by U.S. banks and the fall in the market value of the assets they are holding will reach about $3.6 trillion. The U.S. banking sector is exposed to half that figure, or $1.8 trillion. Even with the original federal bailout funds from last fall, the capital backing the banks' assets was only $1.4 trillion, leaving the U.S. banking system about $400 billion in the hole.

(end snip)

[BlooInBloo]

1. Naturally, they'll be the first to jump on the "Republicans were right. Obama IS a socialist" train

if he does that.

:rofl:

[chill_wind]

2. More:

"The subprime mortgage mess alone does not force our hand; the $1.2 trillion it involves is just the beginning of the problem. Another $7 trillion -- including commercial real estate loans, consumer credit-card debt and high-yield bonds and leveraged loans -- is at risk of losing much of its value. Then there are trillions more in high-grade corporate bonds and loans and jumbo prime mortgages, whose worth will also drop precipitously as the recession deepens and more firms and households default on their loans and mortgages.


But unfortunately, the plan won't solve our financial woes, because it assumes that the system is solvent. If implemented fairly for current taxpayers (i.e., no more freebies in the form of underpriced equity, preferred shares, loan guarantees or insurance on assets), it will just confirm how bad things really are.

Nationalization is the only option that would permit us to solve the problem of toxic assets in an orderly fashion and finally allow lending to resume. Of course, the economy would still stink, but the death spiral we are in would end."

The list of voices continues to grow. K & R.

[aquart]

3. Op ed, right?

[chill_wind]

4. Right. Nouriel Roubini. (& Matthew Richardson)

[RoyGBiv]

6. Yes ...

Nouriel Roubini to be precise, along with Matthew Richardson. Roubini has been saying this stuff for some time and has been inching toward the nationalization angle longer than most.

[deminks]

7. Yes, I changed the title.

[dflprincess]

5. If we're all Swedes does that mean we get their social welfare system as well?

Please say yes.

[GreenPartyVoter]

8. Wouldn't that be lovely?

[chill_wind]

9. Joseph Stiglitz (January 25)

http://www.cnn.com/2009/POLITICS/01/26/stiglitz.finance.crisis/index.html

[bread_and_roses]

10. long past time to start seeing this, but am I in error to be rather astonished

to see it in WaPo?

[kestrel91316]

11. Nationalize the banks.Nationalize health care. Go ahead and call me

a socialist. I no longer give a goddam.

[Jim Sagle]

12. I think we're all socialists now.

[wroberts189]

14. and soon republican will be a dirty word...

[wroberts189]

13. So the TARP money was a waste??? nt

[L0oniX]

15. Nationalization is the answer if you really want the fix and it will punish those who are to blame.

It just doesn't make sense to reward those to have screwed over the nation. Let them all loose and kick them out of the country as well. Fuck the bank stock holders who didn't give a shit about how the money was being made. It seems the word "punishment" is no longer in our vocabulary. I'll cut up all my CC's to get a government CC, especially at the Fed government interest rate which is 0% right now.

[chill_wind]

16. Krugman, Stiglitz, Roubini, Taleb, Baker......

Nationalize. (dkos)

http://www.dailykos.com/story/2009/2/9/14316/26025/353/695269

x-posted from:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=132&topic_id=8198109&mesg_id=8198109