Nationalizing the banks....

[Life_Long_Dem!]

Who is for or against this? Obama is against it for what he says is many reasons but I think its either he knows its a really socialist thing to do and doesnt want to go there or he does but is scared to rock the boat too hard or he is just as clueless as 90 percent of the general public on how bad this really is. what is the take of all of you on this?

 

[Xenophon]

Bad idea.

Everything the gov touches bloats and works poorly.

 

[Old Rocks]

Works more poorly than the banks at present? LOL.

Then there is the little matter of the Apollo project. Seems that worked pretty well, and gave us the computer revolution.

Yes, nationalize the ones that have to be bailed out, straighten them out, then sell them to investors.

 

[Toro]

I don't know if it is the right thing to do but other countries have nationalized their banking system after a credit crisis and they recovered fairly quickly.

I think markets would soar if the government nationalized the banks.

 

[Tristan]

Horrible idea.

Bad economics. Terrible abuse of power.

Amendment 10
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

 

[toomuchtime_]

Who is for or against this? Obama is against it for what he says is many reasons but I think its either he knows its a really socialist thing to do and doesnt want to go there or he does but is scared to rock the boat too hard or he is just as clueless as 90 percent of the general public on how bad this really is. what is the take of all of you on this?

It is probably unavoidable for some banks. If a bank nears bankruptcy, the FDIC will take it over, effectively nationalize it, as a matter of policy. The question is then is it better to pay off depositors and liquidate the bank's assets or should the FDIC or some other government entity take ownership of the bank, put some cash in it so it can continue to operate, and when the financial system recovers, sell shares in the bank to recover the government's investment?

This is a technical question that should be answered on a case by case basis. For example, if a bank is in trouble because too much of its money is invested in debt backed securities no one wants to buy, but is otherwise sound, it would probably be best for the government to operate the bank rather than liquidate it because at present 90% of mortgages are being paid on time and so the underlying value of these securities is still quite high, and after the financial system recovers, they should be worth much of their face value. All that bank really needs is some operating capital for a few years.

On the other hand, if the bank is in trouble because it made too many high risk loans that are now in default, it might be better for the government to cut its losses and just pay off depositors and liquidate other assets. You'd really have to study a bank's books carefully to know which is the best decision for that particular bank.

It's well to remember that when we nationalize a bank, we wipe out shareholder value. In the two above cases, shareholder value was already lost, so the only considerations are will keeping the bank in operation help the economy and will taxpayers' investment in keeping it operating be recoverable. But if a bank is not on the verge of bankruptcy but needs more cash to provide the services our economy needs, we should try not to destroy shareholder value, since in the cases of large corporations the shareholders are mostly mutual funds that are in the portfolios of virtually every charitable trust, every university's trust, every pension fund and every 401k.

In these cases, it would be preferable to to find some way of providing more operating capital to the bank without destroying shareholder value. This could be done by buying shares in the bank, thus reducing but not completely destroying shareholder value, or buying debt backed securities the government thought would eventually recover their value or lending money to the bank in exchange for warrants or other collateral, always on the basis that the bank would follow certain rules of operation and that taxpayers would recoup their investment before shareholders shared in any profits.

As a practical matter, our financial system is too huge for the government to maintain effective control over all of it without nearly doubling the size of government, but the good news is that all the government has to do is get enough of the financial system up and operating to restore investor confidence and then private money will return to finance the rest. No one really knows how much money this would take, but Geithner seems to think it could be done with $1 trillion and most estimates I've seen say $2 trillion. It's a lot of money but all of it would be secured by equity in the banks, securities the government has confidence in or secured loans.

 

[Agnapostate]

I'm in favor of complete collectivization of the means of production, though consolidation of power in a centralized state is unacceptable to me.

 

[editec]

Given that we invested more in many banks than their market value, if the US government took over those banks, that would NOT be nationalizing them.

Let's call it what is would really be, shall we?

We'd be BUYING those banks...and WILDLY overpaying for them, too.

Is THAT socialism?

Not fucking hardly.

But giving those banks money, and taking on their toxic assets while allowing them to continue to exist as pirivately owned banks?

What IS that?

Well it sure as hell isn't socialism.

And it isn't CAPITALISM , either, isn it?

I think its Klepto-capitalism, personally.

But I'd be willing to consider another name for it if any of you can come up with one..