Paul Krugman:Banking on the Brink

[cal04]

http://www.nytimes.com/2009/02/23/opinion/23krugman.html

Comrade Greenspan wants us to seize the economy’s commanding heights.

O.K., not exactly. What Alan Greenspan, the former Federal Reserve chairman — and a staunch defender of free markets — actually said was, “It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring.” I agree.

The case for nationalization rests on three observations.

First, some major banks are dangerously close to the edge — in fact, they would have failed already if investors didn’t expect the government to rescue them if necessary.

Second, banks must be rescued. The collapse of Lehman Brothers almost destroyed the world financial system, and we can’t risk letting much bigger institutions like Citigroup or Bank of America implode.

Third, while banks must be rescued, the U.S. government can’t afford, fiscally or politically, to bestow huge gifts on bank shareholders.

(snip)
What we want is a system in which banks own the downs as well as the ups. And the road to that system runs through nationalization.

[democracy1st]

1. thanks for posting I totally agree ,no more bailouts for these guys!

[YvonneCa]

2. Dr. Krugman's books are great, too. I just. finished ...

..."The Return of Depression Economics" and "Conscience of a Liberal." He knows what he is talking about...Nobel Prize winning economist!!! Let's hope people are listening...

[Double T]

3. All of the large financial institutions need to be dismantled and broken up or.......

parts sold off to smaller regional banks. Big banks aren't too big to fail, they are too big to exist.

[Why Syzygy]

4. “preprivatization”

Let's sell it.

[Fleshdancer]

5. I think it's starting:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aVw5u2ehimYc&refer=home

Citigroup in Talks That May Raise Government’s Stake, WSJ Says

Feb. 23 (Bloomberg) -- Citigroup Inc., the recipient of $45 billion in U.S. government aid, is in talks with federal officials that may increase state ownership of the bank, the Wall Street Journal said.

The government may end up holding as much as 40 percent of Citigroup’s common stock, the newspaper said, citing people familiar with the situation it didn’t identify. Citigroup spokesman Jon Diat declined to comment on the report.

Citigroup, which slumped 22 percent in New York trading Feb. 20 on concern it may be nationalized, proposed to its regulators that the government convert a large portion of its preferred shares into common stock in a transaction that wouldn’t cost taxpayers more money, the Journal reported. Another taxpayer- funded bailout would probably cost Chief Executive Officer Vikram Pandit his job, the report said.

Investors including William Smith of Smith Asset Management in New York have blamed Treasury Secretary Timothy Geithner’s failure to clarify his intentions regarding Citigroup and Bank of America Corp. for hurting the companies’ stocks. Citigroup shares have tumbled 71 percent this year and Bank of America is down 73 percent, ranking the banks among the 10 worst performers on the S&P 500 index.