Schumer clarifies "nationalization"

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."

It looks like a consensus may be developing along the lines that Schumer outlined. Sounds ok to me. And if the clowns want to call it "socialism," let them -- just remind them that they lost the election.

Ralph

The bank nationalization dilemma

During the campaign last fall Sarah Palin shouted out that Obama wanted "to experiment with socialism."

As reported in The Hill yesterday,

Douglass Elliot, a fellow on economic studies at the Brookings Institution who has written about nationalization, told The Hill, "Taking over banks can be portrayed as socialism, so it’s more difficult for a liberal to do it than a conservative."

The banking industry opposes any nationalization of banks as anti-competitive and outside the role of government.

"If you had government running the banks, in the long run, you’d destroy the private sector," said Scott Talbott, a vice president with the Financial Services Roundtable.

On the other hand, several prominent Republicans have spoken favorably about nationalization in the past week, including conservative Senator Lindsey Graham and former Federal Reserve Chairman Alan Greenspan.

Others in the financial industry have too: "Basically, nationalization is the only option left in my view," said Axel Merk of Merk Investments, a Palo Alto-based firm that manages Merk Mutual Funds. "It’s the fastest way to secure the system."

Some proponents of nationalization argue that the only way to fix the problem we're in and restore confidence among investors is to nationalize the most vulnerable banks and eventually sell off their valuable assets. "There are people out there who think nationalization is the way to go, and I think they're getting a good audience right now," said Brian Gardner of Keefe, Bruyette & Woods.

President Obama has, up to this point, resisted the idea. So here we have a reversal: Republicans calling for a "liberal/socialist" idea and Democrats resisting.

Can we be sure that this is a genuine evaluation and support from the Republicans and not a trick to lull Democrats into thinking they have bipartisan support, only to have them turn around and scream "socialism" to their gullible constituents?

I've been observing their dirty political tricks far too long to be sanguine about Republicans' motives. Just short of believing paranoid conspiracies is probably the healthy stance to take.

But let's also hope that Obama and his financial advisers are not shying away from a necessary solution in order to avoid political heat.

Ralph

Hate the bill, love the money

Every day I think it's time to stop writing critical blurbs about the Republican clowns and political snarks. And every day they do something that just can't be ignored. So, at least one more.

The American Recovery and Reinvestment Act (that's the real name, not "stimulus bill" that everyone insists on) got not a single Republican vote in the House.

However, they're singing a different tune now that there's money to be had for their districts. As reported by Ryan Grim on HuffingtonPost, here's what Rep. Blaine Luetkemeyer (R-MO), who voted against the bill, says now:

"Within the stimulus package there is some Pell Grant money, which is a good thing. It helps students be able to pay for their education and that's kind of a long term stimulus effect there. I mean obviously that's not gonna provide a job in the next 120, 180 days, but the ability of someone to get an education is an economic development tool," Luetkemeyer said at a local college. He was there, in another inside-outside Washington twist, to celebrate an earmark for a college building.

He lamented that there would be far fewer such earmarks in the future. "If they go back to the rules, it will make it very difficult to get earmarks through the next two years because number one we don't have any more money, we just blew it all on this stimulus package. . . ."

Ken Spain, a spokesman for the National Republican Congressional Committee, said . . . that Republicans did support a stimulus in general, just not the one Democrats presented to them. . . [which included] absurd pork-barrel spending projects."

"Republicans stood willing and ready to support commonsense measures in the stimulus package . . . Republicans said 'yes' to a true stimulus package, but unanimously said 'no' to putting the politics of pork before the needs of the middle class," said Spain.

Rep. Don Young (R-AK) put out a press release saying that he "won a victory for the Alaska Native contracting program and other Alaska small business owners last night in H.R. 1, the American Recovery and Reinvestment Act."

Let's get this straight. Don Young won a victory for programs in Alaska by voting AGAINST the bill? How did he manage that sleight of hand? And Blaine Luetkemeyer celebrates one earmark and laments there won't be more -- but dismisses the infrastructure investments actually in the bill?

OK, try this out. An "earmark" for a college building (which Luetkemeyer takes credit for) is good and there should be more; but the Recovery bill was bad because it is full of "pork" for things like school construction. But part of the bill was good because it increased Pell Grants to college students; but the bill was bad anyway, because the Congressman didn't get to choose his pet spending projects.

See, if it's in a Republican bill, it's a worthy earmark project for their districts; if it's in a Democratic bill, it's an "absurd pork barrel project."

Call it whatever you like, the American people will decide who deserves their votes in November 2010.

Ralph

"We're running out of rich people in this country"

Did I mention the Republican clowns in Congress?

Remember Michelle Bachmann (R-MN) who was re-elected to Congress in 2008 despite having displayed her penchant for wacky statements by proclaiming (MSNBC, Oct 8, 2008) that Barack Obama and his wife Michelle held anti-American views and couldn't be trusted in the White House. She even called for an investigation of other members of Congress to "find out if they are pro-America or anti-America."

She's at it again. About the economic recovery act, she had these choice comments in a radio interview in her native Minnesota:

* the recovery package won't work because "We're running out of rich people in this country."

[Yeah, times are tough all over. I just read that Mitt Romney is selling two of his four mansions -- they're selling the $5 million ski lodge and the $3 million Boston home and keeping the $10 million lakefront mansion and the $12 million beachfront compound.]

* many members of Congress have "a real aversion to capitalism."

[Well, if by 'capitalism' she means taxing the poor to give tax cuts to the rich -- maybe.]

* ACORN is "under federal indictment for voter fraud," but the stimulus bill nevertheless gives ACORN "$5 billion."

[In reality, ACORN is not under federal indictment and isn't mentioned in the stimulus bill at all.]

* the stimulus bill includes a measure to create a "rationing board" for health care, and after the bill becomes law, "your doctor will no longer be able to make your healthcare decisions with you."

[Simply not true. She makes stuff up.]

* the "Community-Organizer-in-Chief" is also orchestrating a conspiracy involving the Census Bureau, which the president will use to redraw congressional lines to keep Democrats in power for up to "40 years." When the host said he was confused, noting that congressional district lines are drawn at the state level, Bachmann said Obama's non-existent plan is an "anti-constitutional move."

[I guess conspiracy to defraud voters is so familiar to them they just assume everybody does it. Remember in 2006 the U.S. Supreme Court ruled that the redistricting forced by Texas Republicans was in violation of the Voting Rights Act? This was the case where Tom Delay was accused of illegally sending a US government plane to search for the Democratic legislators who were hiding out in another state. They were trying to avoid being forced to attend a legislative session, thereby denying a quorun, where this redistricting would be voted in.]

With elected officials like Bachmann, who needs Ann Coulter?

Ralph

Why is Socialism a dirty word?

Last Sunday on TV's This Week with George Stephanopolis, Senator Lindsey Graham (occasionally one of the Republican clowns, in my view) rather resignedly commented that the banking crisis is so bad that we might need to nationalize some of the banks. Meaning, I think, that it might be the only way to save the banking system as we know it.

Democratic Senator Charles Schumer (NY) disagreed, essentially saying that it's not that bad. Graham later defended his comments, saying that he meant majority ownership of some banks, not nationalization of the whole industry. “Politicians are worried about words,” he said Monday. “I'm worried about outcomes.” That sensible statement helps remove him from the clown roster.

I don't know the answer. Apparently it is an idea that's being given consideration, but as a temporary measure rather than a long-term solution.

It's not the pros and cons of nationalization that interest me, however, but the reaction to it -- especially the reaction of Republicans to one of their own espousing a "liberal" idea. Some even dare to call it "socialism," the ultimate dirty word to Republicans these days.

“That's going above and beyond being a maverick,” said Glenn McCall, York County (NC) GOP chairman and a Bank of America executive. “That's saying that socialism in our country would work better than letting folks use their God-given talent to create and foster economic growth.”

And just how well has "letting folks use their God-given talent to create and foster economic growth" worked? I believe that's been the policy for the past 25 years at least, and look where it got us, what with all the deregulation and greed and economic bubbles and credit default swaps.

Ralph

More Republican splits

Last December, Pat Robertson had said that he was "remarkably pleased" with President-elect Obama and that he "has the makings of a great president."

Interviewed recently by Dan Gilgoff of "God & Country" blog, Robertson backed off a little bit but still said this:

He hasn't been as skillful in a number of areas. I think he's showing partisanship. What I said on CNN is that if he's not partisan and doesn't swing out at the left, he has the potential to be a great president. But look at his cabinet appointments. And the stimulus package is a disaster. He let [House Speaker] Nancy Pelosi write the bill. He should have exerted more leadership about what went into the stimulus package. It's not over, but I still want to give him the benefit of every doubt, and I definitely hope he succeeds. It wouldn't be good for Americans for him not to. We don't want a president who fails at domestic and foreign policy.

DG: So you don't subscribe to Rush Limbaugh's "I hope he fails" school of thought?

That was a terrible thing to say. I mean, he's the president of all the country. If he succeeds, the country succeeds. And if he doesn't, it hurts us all. Anybody who would pull against our president is not exactly thinking rationally.

It's another mark of the disarray in the Republican party when Pat Robertson begins to sound like the moderate and reasonable voice.

Ralph

Republican split

There is a growing divide within the Republican party between the rabidly anti-spending, ideological, politically motivated crowd in Congress, who seem increasingly divorced from the mood of the country, and the more pragmatic Republican governors, who have to deal with local budgetary problems.

Obama got support from only three Republican senators, but the Republican governors of Florida, California, Vermont, and Connecticut joined 14 Democratic governors in signing a letter to Obama praising his economic plan.

Congressional Republicans begin to look more and more like a bunch of clowns, while these governors seem more mature public servants.

So here's the dilemma: do we want the clowns to win out so they'll be easier to defeat in next years midterm elections? Or do we want the pragmatic governors to prevail, even though they will be more formidable electoral foes?

Ralph

Enough bi-par already

Bipartisanship is overrated -- at least the way it is construed in Washington by the minority group to mean "you have to let us help write the bill." Obama insists that it means listening to the other side with civility and respect and adopting their ideas when they are an improvement and will work. It does not mean letting them write 50% of the bill.

Think of it this way: you're climbing a path up a steep hill when a huge boulder comes rolling down the hill and will crush you if you don't get out of the way. Some in your group yell "jump to the left" and others yell "jump to the right." If you try to give both equal voice, you stay in the middle and get crushed.

To extend the analogy: we should say to the Republicans, "The last time you convinced us to jump to the right, we got crushed. And the American people have just elected us to use our judgment, so we're going to jump to the left." End of argument.

If the Democrats had let the Republicans have an equal voice in the Economic Recovery bill, it would have had too little spending to be effective and not enough tax cuts to be effective either (from their point of view). It needed to be largely spending with targeted tax cuts for those who most need them. The bill we wound up with has less spending than needed, in order to entice Republicans by changing the alternate minimum tax -- and then they didn't vote for it anyway. The AMT needed to be fixed, but it shouldn't have been in this bill.

We should not be swayed by Republican's phony outrage. They didn't really want to have a part in the bill because then they'd have to share the responsibility when it's less than miraculous. With very few exceptions (like the 3 Senators), they're playing politics, not trying to solve the problems of the nation.

Ralph

Who knew?

The signs were all there -- at least we now look back and see the signs that the experts missed or ignored. What seems to have been lacking was common sense.

Nobel Prize winning economist Paul Krugman writes in Monday's New York Times:

Last week the Federal Reserve released the results of the latest Survey of Consumer Finances, a triennial report on the assets and liabilities of American households. The bottom line is that there has been basically no wealth creation at all since the turn of the millennium: the net worth of the average American household, adjusted for inflation, is lower now than it was in 2001.

At one level this should come as no surprise. For most of the last decade America was a nation of borrowers and spenders, not savers. The personal savings rate dropped from 9 percent in the 1980s to 5 percent in the 1990s, to just 0.6 percent from 2005 to 2007, and household debt grew much faster than personal income. Why should we have expected our net worth to go up?

Yet until very recently Americans believed they were getting richer, because they received statements saying that their houses and stock portfolios were appreciating in value faster than their debts were increasing. And if the belief of many Americans that they could count on capital gains forever sounds naïve, it’s worth remembering just how many influential voices — notably in right-leaning publications like The Wall Street Journal, Forbes and National Review — promoted that belief, and ridiculed those who worried about low savings and high levels of debt.

Then reality struck, and it turned out that the worriers had been right all along. The surge in asset values had been an illusion — but the surge in debt had been all too real.

So now we’re in trouble . . .

Not only do we have the staggering trillions of dollars to fix the system and save the institutions, but then we have the kitchen table version of too much debt, no savings, no rainy day cushions, and retirement funds decimated.

It was insane to think we could fight a war and cut taxes at the same time. It was insane to think we could have it all, even if we knew we couldn't make the payments.

I'm just old enough to remember the shadow of the 1930s depression and the sacrifices of World War II. Back then, people saved up to buy things they wanted. Or they would put something on layaway, make their monthly payments, and only when it was paid in full could they take it home. Then came credit cards, and we all got used to having it now and paying later.

Credit got easier and easier, lenders sold off the debts and had no further risks so they took bigger risks, and advertising made it all seem so desirable and necessary.

I'd hate to give up my computer and the internet -- but sometimes the good old days look pretty good.

Ralph

To post a comment

People continue to have trouble posting a comment on this site. I regret that the format makes it difficult and confusing, but here's how to do it.

To add a comment, click on "comments" at the bottom of the blog window. A small window will open where you can write your comment. If you want to see how it will look when posted, click on "preview." If you want to make changes, click on the X in upper right corner and it will return you to the writing window.

When you're ready to post it, click on "comment as" and select an identity from the window that drops down. This is what confuses people. If you have a google account, you can click that, otherwise you can type in your name and URL or just comment as "anonymous." You can still identify yourself in the message itself. Then click on "post comment."

I welcome your thoughts and challenges.

Ralph

Canada replies

A few days ago, I reprinted excerpts from a Newsweek article about the smart Canadians whose economy is sailing along just fine due to their being more prudent and regulatory. I titled the piece "Those dull, smart Canadians." I should have put quotations marks around "dull," because what I meant to convey was that behind that sometimes even self-inflicted stereotype, the real point is that they govern themselves in a much smarter way that we do.

My Canadian friend, Alan, has this to say in response:

May I add this to Shrink Rap, if so, how?

Canada dull???

With ALL the natural beauty bordering three oceans, (Pacific, Atlantic, Arctic), the placid Prairies, the regal Rocky Mountains, and la joie de vivre from the distinct culture of la belle province, Quebec?

OK, approximately 50% of my earnings do go to taxes, federal, provincial, goods and services taxes, school taxes, property taxes, etc., however, ...any Canadian can go into any hospital with a plastic health card in hand. Our socialized medicine ensures all required medical services are rendered - free...

Just because we do not have a colourful (Canadian spelling) Leader-in-Chief, we still have Prime Minister Harper - a Bush wannabe.

When the then Prime Minister Chretien refused to enter Iraq, our current P.M. Harper did a voice-over commercial standing high lighted behind a faded image of Bush, espousing;

"Remember how proud you felt when the Liberals (Canadian political party) told Bush 'no way' on Iraq. Harper was ashamed of his country. He went on American TV to denounce the decision and support George Bush."

With our three national elections in the past four years, our P.M. suspended parliament, true power resting with the minority parties who are really calling the shots...

and you call Canada dull, eh???

Point well made, Alan. I'll never call you dull again, even clearly defined as irony.

Ralph