Sen. Charles Schumer (D-N.Y.) has clarified what he said about objecting to "nationalization" on TV last week. He distinguishes "bad nationalization" from "good nationalization." Bad is taking over the bank and holding it long term, running it, and having government make banking decisions that it's not good at.
What he does advocate is having government use the "stress test" that the Treasury Secretary is conducting, choosing those banks that are insolvent, and then taking them over temporarily, firing their management, wiping out the shareholders (whose holdings are worthless) and getting the bank ready to be quickly resold.
Thus, the government would not become a super-banker but rather a manager and liquidator of failed banks. Actually running a bank over a long time is bad, because the government is bad at it and because it concentrates too much power and could lead to "crony capitalism," Schumer said.
Schumer would prefer a new term, because "nationalization" means different things to different people. When the HuffingtonPost interviewer read him a list of suggestions sent in by readers, he liked "detoxification."
Ralph
On Sunday's talk shows, it seems that a clear consensus has developed for something like temporary nationalization of banks in trouble. Practicality seems to be over-riding ideology.
ReplyDeleteWhat helps is that, whatever you call it, and "nationalization" has a trigger-like negative response for many, we are already well on the way to having government invest in banks significantly, getting rid of bad assets, and restructuring the failing banks.
As George Will put it: "With credit now treated essentially as a public utility, the difference between what we have and what nationalization would be is marginal."