The problem with Nationalization

[CTLawGuy]

1. It has to get by (a) the Blue Dogs, (b) Mitch McConnell (aka the Turtle) and his gang of lemmings, AND (c) Evan Bayh and his gang of 15. I wouldn't bet the house on it.

2. The government would have to hire someone to run the nationalized banks. Anyone who actually KNOWS how to run a bank would be opposed by nationalization supporters for this position. So that leaves people who have no actual banking experience.

3. The taxpayers would be bearing the loss of the troubled assets, even under nationalization. The government needs to replace the lost liquidity while it holds the troubled assets until all the cash flows from them are paid, and that means taxpayers will front a TON of money. This liquidity is needed so that people can buy homes and cars again, and businesses can get money to make payroll.

[FrenchieCat]

1. WTF? I thought Nationalization was free, easy, and perfect?

I heard no taxpayer money would be used, investors would rush to invest and the Dow would go to 10,000 really quick, and life would be all better again!

or maybe not.

[CTLawGuy]

2. clearly!

I don't have a Nobel Prize, so I don't know what I'm talking about. Thanks for setting me straight ;)

[EmilyAnne]

11. But what about my pony? Wasn't there a nationalized pony plan? n/t

[backscatter712]

3. I understand Obama's plans a bit more.

He's thinking well ahead at this point.

Right now, it's still early in the plans, and Obama wants to try the less radical strategies first, sort of like how a doctor will run a few tests, then try conservative treatments first like medications before ordering surgery.

I'm less unhappy with Geithner than I was a few days ago - this plan actually seems to be a little more well-thought-out than his earlier attempts, and he's trying to engineer it so private investors help finance it, and have skin in the game. In other words, he wants the high-rollers on Wall Street to be financially motivated to make this plan work.

It very well may not work, or it may only be partially effective. In any case, it does buy time.

In a few months, if it's clear that the banking and finance industries are still falling apart, that is when Obama switches to more aggressive treatments and makes the push for nationalization. It's politically prudent too - then he can say that he tried the conservative approaches, and they didn't work, and it's time for stronger measures. That'll make it easier to jam down the throats of the Blue Dogs and the GOP, and it'll give time for Geithner to get the Treasury Dept. organized, fill all those job openings, and plan for a nationalization.

[CTLawGuy]

5. I agree

that it was weird for Geitner to make an initial announcement without saying very much. But, fundamentally, what is being done here needs to be done.

[EmilyAnne]

17. People seem to be very upset because the investors that will take on part ownership of these toxic

assets will receive protections and rewards for their involvement.
That makes perfect sense to me. Without protections and rewards, why would they want even the tiniest part of a "toxic assets?"
Krugman says that the problem with these assets is that they are overvalued by the banks. That is probably true.
Then he says that a problem with Geithner is that he believes they are valuable.
I don't know why Krugman believes that the value Geithner believes in is equal to the value claimed by the banks.
Have you read anything about that? Has Geithner said he is not going to negotiate the prices down?

It seems that if the assets are worthless, then no one in the private sector will want to invest in them, they'll stay with the banks and the plan will flop.
If the assets are overvalued, then no one in the private sector will want to invest in them, they'll stay with the banks and the plan will flop.
It therefore seems that the values will be adjusted, as Krugman says they need to be, before they are purchased by the public/private partnership.

I am trying so hard to see every side to this whole thing and I hope many others will too.

[Kurt_and_Hunter]

4. Some sound points, but #2 is off-base

The corporate entities do no want to clear the books because, among other things, doing so might cause them to be nationalized.

After the worst has already happened I don't know that bank-types are incapable of liquidating assets when the new boss tells them to.

And the feelings of nationalization proponents would have zero influence in a nationalization scenario. Anyone who would be a problem if the banks weren't nationalized just the right way will be a bigger problem under other non-nationalization scenarios.

[CTLawGuy]

9. who is going to be liquidating assets?

the banks aren't going away.

nationalization means government enters the banking business, i.e. taking deposits/investments, deciding whom to loan money to and for how much, how to administer the whole operation. This is hard to do without experience and the only people with experience are those who currently run banks, and these are not popular people, but they will have to be involved somehow, unless you want very poorly run banks.

[Skink]

6. Nationalization it's easy. We even did it while Reagan was in office.

Reagan even presided over the commies preserving social security.

[CTLawGuy]

13. social security != a bank

NT

[Thrill]

7. Nationalization would cost the Democrats Congress, its a political nightmare

And Obama could kiss his strong Independent base goodbye

[FrenchieCat]

8. And kiss health care good bye!

or any hope for it....ever!

[Skink]

10. That's gone anyway.

No return on our public invesments now. Most probably a loss.

[FrenchieCat]

12. How's that?

Why don't you outline that for me?

Cause I'm just stupid.

[Skink]

15. Obama just took the trillion dollar deficit a doubled it.

I'm fine with the deficit spending if we had a chance of making a profit. Now we don't cause we took the Paulson route. Backstop the losses.

[FrenchieCat]

19. That's just a lie.

That's too bad that you have to revert to that to be in disagreement with the plan.

[amandabeech]

14. So, do you think that the RTC cost Bush I the election over Clinton?

Bill Seidman presided over that mess and he's still alive. Perhaps he knows someone who would do the job this time around.

[stillcool]

18. Do you think the Savings & Loan debacle..

is the same in scope?

http://www.inthe80s.com/sandl.shtml
In the early 1980s, under Reagan, regulatory changes took place that gave the S&L industry new powers and for the first time in history measures were taken to increase the profitability of S&Ls at the expense of promoting home ownership.

What is important to note about the S&L scandal is that it was the largest theft in the history of the world and US tax payers are who was robbed.

The problems occurred in the Savings and Loan industry as they relate to theft because the industry was deregulated under the Reagan/Bush administration and restrictions were eased on the industry so much that abuse and misuse of funds became easy, rampant, and went unchecked.

Savings and Loan Scandal
Here are some facts on the infamous S&L scandal of the eighties which we are still paying for.

* The Savings and Loan scandal is the largest theft in the history of the world.
* Deregulation eased restrictions so much that S&L owners could lend themselves money.
* The Garn Institute of Finance, named after Senator Jake Garn, co-authored the deregulation of the industry and received $2.2 million from industry executives.
* Neil Bush, George Bush's son, never served time in jail for his part in running an S&L into the ground.
* Represenative Fernard St. Germain, who was head of the House of Representatives banking, co-authored the deregulation and was voted out of office after other questionable dealings and was sent back to D.C. as an S&L lobbiest.
* Charles Keating, when asked if massive lobbying efforts had influenced the government officials, he replies "I certainly hope so."
* The rip-off began in 1980 when the government raised the federal insurance on S&L's from $40,000 to $100,000 even though the typical savings account was only around $6000.
* Some of the seized assets were a buffalo sperm bank, a racehorse with syphilis, and a kitty litter mine.
* If the White House had stepped in and bailed out the S&L's in 1986 instead of delaying until after the 1988 elections, the cost might have been only $20 billion.

[dave_p]

16. (1) and (3) are right, but...

... would you rather run a private-sector bank or an assured government enterprise right now? These people aren't committed to free capitalist enterprise. That's why they run the economy like it's 1109.

[cooolandrew]

20. This is the main part it's not particularly that the President >

appears too opposed to these things it's just the political will. He's doing the best he can with the public opinion and the congress he's got. Still our work out here to swing the pendulum further left. There are negatives to nationalization as you sometimes get complacent workers but there is a time where it's just called for, sadly probably not the congress to make it so. When private industry can't behave itself the next option is very strict rules and regulations. Maybe we need to drop the word regualtions and move to rules and guidelines.

[Honeycombe8]

21. Bayh and his gang of 15 ARE the blue dogs.

:eyes: