From the Economist.com blog: "Socialism for the Rich"

[Ghost Dog]

In his recent book - The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash - Charles R. Morris writes:

"The question is whether the Countrywides of the world are risk-taking enterprises or public utilities. You can't be both. If the government is going to be on the hook, by means of deposit insurance, the various federal borrowing windows, or implicit federal insurance for "too important to fail" institutions, bank risk-taking has to be tightly controlled. Cautions, risk-adverse public utility-style banks need intelligent credit and balance-sheet managers, not envelope-pushing high-rollers with eight-figure paychecks."

We are being led to believe that taxpayers have just two options: (1) bailout the banks and brokerages or (2) see the economy go into a tailspin.

But, there's a third option: nationalize the banks and brokerages.

Essentially, this is what the British did with their troubled Northern Rock bank.

Unfortunately, that's not what will happen with failed investment banks like Bear Sterns.

Bear will be bailed out. It is socialism for Bear's rich clients and managers.

To prevent public outrage, we're now hearing that in the future the government will regulate these institutions tightly. By doing so, we're told, regulators will keep risk low so a credit crisis like this will never happen again. But, of course, this is what we heard back during the Savings and Loan crisis.

However, I don't think you can blame the regulators. They work with the regulations they're given, and the finance industry lobbies congress heavily to take away regulation to "free up free enterprise and innovation." But financial innovation is similar to creative income tax accounting: the innovation comes in finding loopholes in the rules and regulation. The high-rollers in finance get paid their eight-figure paychecks to find the loop holes (or create them through lobbying) that will allow them add more risk and take on more leverage.

Perhaps someday the taxpayers are going to come out of their mass media induced hypnotic trance and realize they're being played for saps. When this happens, they won't let the banks fail, and they won't bail them out: We will nationalize them and all the other so called "private companies" who are "too big to fail."

/... http://www.economist.com/blogs/freeexchange/2008/03/bearly_afloat.cfm

--> Nationalize them or break them up: Can't say fairer than that. And regulate the lobbyists, to boot.

[Fenris]

1. The Economist rarely is in favor of nationalizing.

Their last issue explained how Northern Rock's nationalization was necessary but also how the government had mucked it up. They're right though - these bailouts of private institutions is a weird, perverse socialism that blows taxpayer money rescuing irresponsible banks and brokerages.

[Ghost Dog]

2. Indeed The Economist is rarely in favor of nationalisation; quite the opposite!

Which is one reason why the discussion attracted my interest.

As for blowing taxpayers' money, yes and no. These Federal Reserve-backed bailouts end up costing taxpayers, indeed everyone, through inflation. But, as Selatius points out in this post, the Fed is another privately-owned corporation, not an entity of the US Government, with the power create money out of thin air (but not to print it - it's done simply by making entries in ledgers). And I'm not sure exactly if or how well it's regulated by the likes of the SEC or of recent Treasury Secretaries.

A prime candidate for nationalisation, one would have thought. But then that would seem to require first putting an end to the 'privatisation' of Congress...

[kenny blankenship]

7. This was only a poster on their forums who wrote this, not an Economist op/ed

[Ghost Dog]

9. That's right, but

if you check the Economist blog FreeExchange's about page you'll see that the OPs there are originated by Economist journalists and analysts. And this OP refers to this piece from the Condé Nast Portfolio.com site in which we read, for example:

...Well, the Fed has a scheduled meeting of its monetary policy committee on Tuesday. At this point a three-quarter-point rate cut is all but certain, and there's a growing consensus that they'll cut rates by a full percentage point.

Even as the dollar is plunging, commodities are soaring, and the risks of inflation are high?

Inflation is a medium-term risk. Financial meltdown is a near-term risk, and that's what the Fed has to worry about right now.

And cheaper money will prevent financial meltdown?

It might. It's worth a try, at least: There's not much else the Fed can do, beyond the outright nationalization of Bear Stearns.

Wow, that could really happen?

Anything is possible at this stage, but nationalization really would be a last resort, and would violate most of the precepts of George W. Bush and Hank Paulson. In a free-market system, companies that make bad bets have to be allowed to fail.

- It shows that the subject has arrived on the agenda for debate in so-called 'expert' circles. I've been finding that following links from here leads to plenty of interesting opinion and information...

[malaise]

3. When the state backs the corporations using taxpayers' money,

it's not socialism for the rich, it's Fascism.

[Ghost Dog]

4. I think I'd put it more the other way round:

It's when the rich control the State that you have that problem...

Interesting area for discussion.

[magellan]

5. It's both

The corporations control the state, and the state is subsidizing the corporations with OUR money.

[malaise]

8. Bingo n/t

[girl gone mad]

6. Talk of regulation is not preventing public outrage.

Everyone that I've talked to about it is pissed.

[Theres-a]

10. K & R

Thanks.

[Brigid]

11. Here's a Freeper rule of thumb:

If it helps the poor, it's socialism. If It helps the rich, it's called "boosting the economy" or some such nonsense. :eyes:

[mnhtnbb]

12. Actually, it's a sign of fascism. Use the government to benefit corporations.

Privatize profits and socialize risk.

[Yavin4]

14. You Are 100% Correct

Freepers have been brainwashed into being serfs for the rich.

[femrap]

13. Bomb K Street. nt

[Karenina]

15. . .

:nuke:

[femrap]

16. Cool! nt