Nationalizing the Banks Seems Inevitable: How Bad Does It Have to Get First?
By Joshua Holland, AlterNet. Posted February 16, 2009.
Failure to act decisively over the collapse of our banking system could mire the US in a protracted slump, like Japan's "lost decade" in the '90s.
By Joshua Holland, AlterNet. Posted February 16, 2009.
Failure to act decisively over the collapse of our banking system could mire the US in a protracted slump, like Japan's "lost decade" in the '90s.
There is a bottom-line to the banking crisis which the Obama administration appears intent on trying to avoid: some number of financial giants are simply insolvent. A recent analysis by NYU economist Nouriel Roubini -- known as "Doctor Doom" for his dire predictions about the collapse of the financial trading system, predictions that have since become painfully true -- estimated that the losses facing the American financial sector will reach $3.6 trillion dollars.
In the past, governments, including that of the first Bush administration during the savings and loans failures of the late 1980s, have taken over insolvent institutions that were judged to be "too big to fail." They fired most of the management teams, wiped out the banks' shareholders, protected depositors, and sold off the institutions assets in an orderly way, minimizing the shock to the larger economy.
Following the floundering, piece-meal interventions presided over by former Treasury Secretary Hank Paulson, the chorus calling for nationalization has grown. Once considered a radical move, even fiscal conservatives like Senator Lindsey Graham (R-SC), have suggested that this might be the least-expensive route to saving a financial system on the brink of collapse. On ABC's This Week, Graham said, "This idea of nationalizing banks is not comfortable. But I think we've got so many toxic assets spread throughout the banking and financial community, throughout the world, that we're going to have to do something that no one ever envisioned a year ago." "I would not take off [the table] the idea of nationalizing the banks," he concluded.'
In the past, governments, including that of the first Bush administration during the savings and loans failures of the late 1980s, have taken over insolvent institutions that were judged to be "too big to fail." They fired most of the management teams, wiped out the banks' shareholders, protected depositors, and sold off the institutions assets in an orderly way, minimizing the shock to the larger economy.
Following the floundering, piece-meal interventions presided over by former Treasury Secretary Hank Paulson, the chorus calling for nationalization has grown. Once considered a radical move, even fiscal conservatives like Senator Lindsey Graham (R-SC), have suggested that this might be the least-expensive route to saving a financial system on the brink of collapse. On ABC's This Week, Graham said, "This idea of nationalizing banks is not comfortable. But I think we've got so many toxic assets spread throughout the banking and financial community, throughout the world, that we're going to have to do something that no one ever envisioned a year ago." "I would not take off [the table] the idea of nationalizing the banks," he concluded.'
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