Op-Ed Columnist - Banking on the Brink - NYTimes.com
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Saved by 10 people (0 private), first by anonymouse user on 2009-02-23
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How would nationalization take place? All the administration has to do is take its own planned “stress test†for major banks seriously, and not hide the results when a bank fails the test, making a takeover necessary. Yes, the whole thing would have a Claude Rains feel to it, as a government that has been propping up banks for months declares itself shocked, shocked at the miserable state of their balance sheets. But that’s O.K.
And once again, long-term government ownership isn’t the goal: like the small banks seized by the F.D.I.C. every week, major banks would be returned to private control as soon as possible. The finance blog Calculated Risk suggests that instead of calling the process nationalization, we should call it “preprivatization.â€
The Obama administration, says Robert Gibbs, the White House spokesman, believes “that a privately held banking system is the correct way to go.†So do we all. But what we have now isn’t private enterprise, it’s lemon socialism: banks get the upside but taxpayers bear the risks. And it’s perpetuating zombie banks, blocking economic recovery.
What we want is a system in which banks own the downs as well as the ups. And the road to that system runs through nationalization.
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Second, banks must be rescued. The collapse of Lehman Brothers almost destroyed the world financial system, and we can’t risk letting much bigger institutions like Citigroup or Bank of America implode
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