Another winner of the Nobel Prize in economics, and a former Clinton White House adviser, joins Paul Krugman today in turning thumbs down on the Treasury's public-private toxic asset plan and suggests that nationalizing banks would be "preferable."
Joseph Stiglitz concludes: "Some Americans are afraid that the government might temporarily 'nationalize' the banks, but that option would be preferable to the Geithner plan. After all, the F.D.I.C. has taken control of failing banks before, and done it well. It has even nationalized large institutions like Continental Illinois (taken over in 1984, back in private hands a few years later), and Washington Mutual (seized last September, and immediately resold).
"What the Obama administration is doing is far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses. It is a 'partnership' in which one partner robs the other. And such partnerships--with the private sector in control--have perverse incentives, worse even than the ones that got us into the mess."
Stiglitz's denunciation of the Public-Private Asset Plan as "a win-win-lose proposal: the banks win, investors win--and taxpayers lose" follows Krugman's observation last week that "it has become increasingly clear over the past few days that top officials in the Obama administration are still in the grip of the market mystique. They still believe in the magic of the financial marketplace and in the prowess of the wizards who perform that magic."
Not only do we have two Nobel Prize economists trashing the proposal but even the radicals at the Wall Street Journal are unhappy that the trough for investors may be too small:
"So not only is the government going to be anointing a favored few to invest in these assets. It is also giving those favored few the opportunity to collect fees and profit-sharing from anyone else that wants to go in with them. In the wake of the AIG bonfire, Mr. Geithner is tempting another outcry."
Unlike those AIG bonuses, the toxic-asset plan is too complex for "another outcry" by politicians or the public, but in the amounts of taxpayer money involved, it dwarfs that issue.
Even worse, it is a key recovery proposal by a President voters want desperately to succeed. But someone in addition to economists and super-investors like George Soros has to put nationalization of banks in some form on the agenda--and soon.
Showing posts with label bank nationalization. Show all posts
Showing posts with label bank nationalization. Show all posts
Wednesday, April 01, 2009
Sunday, March 22, 2009
Obama's Biggest Bet and Ours
We are back in the casino now, ready to play a hand that could make us whole again or leave us broke for a long time to come.
After huge bets on bailouts and stimulus plans, we are about to go all in with $1 trillion to buy bad loans and toxic assets from ailing banks in partnership with private investors.
As Obama pushes our chips into that pot, there is a sinking feeling that the game may be rigged for the Wall Street players around the table who have been hoarding theirs, waiting for a time when the odds are with them.
It's unnerving that the President's chief advisers, Tim Geithner and Larry Summers, have been house men so long that their vision of the game may be inadequate to the needs of a nation that is gambling real money--rent money and what could put food on millions of family tables--on the outcome.
The Public Investment Corporation to be announced tomorrow sounds like a rehash of ideas that have been floating around for months and been picked apart by economists and knowledgeable financial operators. It has the look and feel of another Wall Street heads-I-win, tails-I-break-even proposition.
Before taking the plunge, we should hear the case for temporary and/or partial nationalization of the banks that has been pushed aside for political reasons, which amounts to leaving our fate in the hands of the Congressional clowns who have been showing us who they are in the past week.
As we try to clear our heads of AIG bonus madness and other distractions, let's take the time to get this one right. We have been betting everything on Obama's judgement. There is too much at stake to make the wrong call.
After huge bets on bailouts and stimulus plans, we are about to go all in with $1 trillion to buy bad loans and toxic assets from ailing banks in partnership with private investors.
As Obama pushes our chips into that pot, there is a sinking feeling that the game may be rigged for the Wall Street players around the table who have been hoarding theirs, waiting for a time when the odds are with them.
It's unnerving that the President's chief advisers, Tim Geithner and Larry Summers, have been house men so long that their vision of the game may be inadequate to the needs of a nation that is gambling real money--rent money and what could put food on millions of family tables--on the outcome.
The Public Investment Corporation to be announced tomorrow sounds like a rehash of ideas that have been floating around for months and been picked apart by economists and knowledgeable financial operators. It has the look and feel of another Wall Street heads-I-win, tails-I-break-even proposition.
Before taking the plunge, we should hear the case for temporary and/or partial nationalization of the banks that has been pushed aside for political reasons, which amounts to leaving our fate in the hands of the Congressional clowns who have been showing us who they are in the past week.
As we try to clear our heads of AIG bonus madness and other distractions, let's take the time to get this one right. We have been betting everything on Obama's judgement. There is too much at stake to make the wrong call.
Wednesday, February 11, 2009
Baby-the-Banks Bailout
Making some amends for her newspaper's hyping yesterday, Maureen Dowd, bless her salty tongue, today pistol-whips Tim Geithner's baby-the-banks bailout plan:
"The problem is that the 'lost faith' that Geithner talked about...cannot be restored as long as the taxpayers who are funding these wayward banks don’t have more control.
"Geithner is not even requiring the banks to lend in return for the $2 trillion his program will try to marshal, mostly by having the Fed print money out of thin air, thereby diluting our money, or borrowing more from China. (When, exactly, can China foreclose on us and start sending us toxic toys again?)
"There’s a weaselly feel to the plan, a sense that tough decisions were postponed even as President Obama warns about our 'perfect storm of financial problems.' The outrage is going only one way, as we pony up trillion after trillion."
This cautious approach is in striking contrast to the Obama Administration's all-in attitude toward the stimulus bill.
“If folks are still unemployed," the President told a Florida rally yesterday, "then you guys won’t employ me next time I come down here...I expect to be judged by results. I’m not going to make any excuses. If stuff hasn’t worked and people don’t feel like I’ve led the country in the right direction, then you’ll have a new president.”
Putting himself on the line this way, why is Obama unwilling to take on the banks more directly, as some of his advisers apparently wanted him to do?
Geithner's cautious, sketchy "plan" even sent Wall Street into a swoon. No one expects government to control the banks forever, but as long as taxpayers pour trillions into their greedy little hands, someone should be making sure they are keeping their sticky fingers clean.
"The problem is that the 'lost faith' that Geithner talked about...cannot be restored as long as the taxpayers who are funding these wayward banks don’t have more control.
"Geithner is not even requiring the banks to lend in return for the $2 trillion his program will try to marshal, mostly by having the Fed print money out of thin air, thereby diluting our money, or borrowing more from China. (When, exactly, can China foreclose on us and start sending us toxic toys again?)
"There’s a weaselly feel to the plan, a sense that tough decisions were postponed even as President Obama warns about our 'perfect storm of financial problems.' The outrage is going only one way, as we pony up trillion after trillion."
This cautious approach is in striking contrast to the Obama Administration's all-in attitude toward the stimulus bill.
“If folks are still unemployed," the President told a Florida rally yesterday, "then you guys won’t employ me next time I come down here...I expect to be judged by results. I’m not going to make any excuses. If stuff hasn’t worked and people don’t feel like I’ve led the country in the right direction, then you’ll have a new president.”
Putting himself on the line this way, why is Obama unwilling to take on the banks more directly, as some of his advisers apparently wanted him to do?
Geithner's cautious, sketchy "plan" even sent Wall Street into a swoon. No one expects government to control the banks forever, but as long as taxpayers pour trillions into their greedy little hands, someone should be making sure they are keeping their sticky fingers clean.
Sunday, January 25, 2009
Taking Over the Banks
Call it "partial" or "temporary," the momentum for nationalizing US banks is growing across the political and economic spectrum.
President Obama, Paul Krugman writes, is "going to have to decide how bold to be in his moves to sustain the financial system, where the outlook has deteriorated so drastically that a surprising number of economists, not all of them especially liberal, now argue that resolving the crisis will require the temporary nationalization of some major banks."
This follows George Soros' call for "partially nationalizing" banks, a step that "would clear the air and restart the economy."
In today's New York Times, business columnist Joe Nocera recalls the Resolution Trust Corporation, which took over and sold bad assets during the S. & L. crisis of the 1980s, quoting Tim Ryan, who helped direct the response to that fiasco:
"Did the S.& L. crisis cost the taxpayers money? You bet it did--some $130 billion. But, said Mr. Ryan, 'it would have been triple that' without the R.T.C...
"But to carry out this kind of program, the government has to be in control of insolvent banks...Then it can do the same thing the Office of Thrift Supervision did in the early 1990s: close down the worst, sell others to healthier institutions and recapitalize the strongest. You can shovel capital into banks until you’re blue in the face and they are not going to lend so long as they have toxic assets on their books. They are going to hold onto their capital, fearing new losses."
As the Obama Administration prepares to tighten regulation across the financial system with stricter rules for hedge funds, credit rating agencies and mortgage brokers, and more oversight of derivatives and credit default swaps, the banks remain at the heart of the problem.
At some point--and it had better be soon--pouring taxpayer money into the maws of Citicorp, Bank of America et al will have to be accompanied by enough control to get them lending again instead of just fattening balance sheets, merging and paying themselves obscene bonuses.
It will be more complex than FDR's brief bank holiday in 1933, but something dramatic is on the horizon.
Update: On the Sunday talk show circuit this morning, House Speaker Nancy Pelosi actually used the N word. “If we are strengthening them," she said about the bailouts, "then the American people should get some of the upside of that strengthening. Some people call that nationalization."
“I’m not talking about total ownership,” she quickly added. “Would we have ever thought we would see the day when we’d be using that terminology? ‘Nationalization of the banks?'”
Yes, and not a moment too soon.
President Obama, Paul Krugman writes, is "going to have to decide how bold to be in his moves to sustain the financial system, where the outlook has deteriorated so drastically that a surprising number of economists, not all of them especially liberal, now argue that resolving the crisis will require the temporary nationalization of some major banks."
This follows George Soros' call for "partially nationalizing" banks, a step that "would clear the air and restart the economy."
In today's New York Times, business columnist Joe Nocera recalls the Resolution Trust Corporation, which took over and sold bad assets during the S. & L. crisis of the 1980s, quoting Tim Ryan, who helped direct the response to that fiasco:
"Did the S.& L. crisis cost the taxpayers money? You bet it did--some $130 billion. But, said Mr. Ryan, 'it would have been triple that' without the R.T.C...
"But to carry out this kind of program, the government has to be in control of insolvent banks...Then it can do the same thing the Office of Thrift Supervision did in the early 1990s: close down the worst, sell others to healthier institutions and recapitalize the strongest. You can shovel capital into banks until you’re blue in the face and they are not going to lend so long as they have toxic assets on their books. They are going to hold onto their capital, fearing new losses."
As the Obama Administration prepares to tighten regulation across the financial system with stricter rules for hedge funds, credit rating agencies and mortgage brokers, and more oversight of derivatives and credit default swaps, the banks remain at the heart of the problem.
At some point--and it had better be soon--pouring taxpayer money into the maws of Citicorp, Bank of America et al will have to be accompanied by enough control to get them lending again instead of just fattening balance sheets, merging and paying themselves obscene bonuses.
It will be more complex than FDR's brief bank holiday in 1933, but something dramatic is on the horizon.
Update: On the Sunday talk show circuit this morning, House Speaker Nancy Pelosi actually used the N word. “If we are strengthening them," she said about the bailouts, "then the American people should get some of the upside of that strengthening. Some people call that nationalization."
“I’m not talking about total ownership,” she quickly added. “Would we have ever thought we would see the day when we’d be using that terminology? ‘Nationalization of the banks?'”
Yes, and not a moment too soon.
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