Nationalize the banks outright

ColoradoGuy · Feb 2, 2009

Nobel Prize-winning economist Joseph Stiglitz makes a pretty good case for it here. After all, the public now owns a good share of the risk -- we might as well own whatever benefit is to be had. And the recent outrages about how the banks have spent the bailout money should come as no surprise (at least to anyone besides Henry Paulson and his friends) -- after all, these are the people who got us here.

Over at Obsidian Wings Eric Martin dissects the Stiglitz piece and concludes: "Nationalize it. It's not an ideal solution, just the best available."

(I love the motto over there: "This is the Voice of Moderation: I wouldn't go so far as to say we've actually SEIZED the radio station . . ."

robeiae · Feb 2, 2009

Gah!

It's freakin unbelievable...it's like these folks have absolutely ZERO understanding of their limited ability to see tha future and even LESS THAN ZERO understanding of how large economies actually function.

1) The financial sector doesn't exist in a vacuum. You can't treat it as if it does and expect predictable results.

2) Re the article, it's not "the last five years," it's "the last one hundred, or so." Stiglitz is so limited in his analysis, it's scary. Of course, he doesn't even want to go back fifteen years, let alone one hundred. Because if he did, he'd have to factor in the dot com bubble and the over-the-top expectations on rates of return created by such. And he's knee deep in that.

3) He's mind-bogglingly willing to ignore human nature when it suits his purpose. OF COURSE bank officials are gonna gobble up and sit on free money. The mistake is in offering the money in the first place. Once you do that, you start removing the INCENTIVES for solution-seeking. And that's what is happening, here: the tools in DC are (for the most part) fixated on the government "solving" the current situation. And the only way the government "solves" anything domestically is by throwing money around. So, the current incentives for companies are about figuring out how to get some of that money. As long as the promise is out there, nobody really wants to be successful.

4) The idea that nationalizing these companies--based on a comparison to Sweden--will "fix" them is laughable. As the blog bit points out, transparency (and accountability) is key. Putting these behemoths under government direction is a sure-fire way to quash that hope. But there are--imo--plenty of steps that can, and should, be taken with regard to corporate structures in general. But nobody wants to wade through that. They want a quick-fix. Morons.

5) Appending "Nobel prize-winning" on to someone's name doesn't buy jack, imo. I'm not impressed by Stiglitz's thinking, in the least. Perhaps that Prize needs to be re-evaluated...

ColoradoGuy · Feb 2, 2009

So, you disagree, then? Rob, do you ever agree with anybody about anything? I mean besides those who want to leave everything alone, all the time, no matter what happens? To me, that's paying no attention to history.

Christine N. · Feb 2, 2009

Yes, because that 'leave it alone' thing worked SO WELL for Hoover.

Wait a minute...

robeiae · Feb 2, 2009

ColoradoGuy said:
So, you disagree, then? Rob, do you ever agree with anybody about anything? I mean besides those who want to leave everything alone, all the time, no matter what happens? To me, that's paying no attention to history.

I agree with lots of people, CG. It's just that the people I agree with--in economics--disagree with folks like Stiglitz. We've been through some of this already, on the New Deal.

I agree with a bunch of people on their analysis of that episode in history. Yet, you disagree with them and agree with others. Why is YOUR position preferable to mine, as a matter of course?

You don't like it that I think Stiglitz's ideas are beyond foolish? Can't help you. But saying I want to "leave everything alone, all the time" is disingenuous of you. In my post, I specifically noted that there are things to be addressed in corporate structures. And you damn sure know that I think there are things to address in government. So, your characterization is kind of a cop-out.

However, I do think companies must be allowed to rise and fall. For most of US (and world) history, this has been the case. Take a look at the largest companies at various moments in the past and see how many of them are gone with the wind in relatively short order. This "too big to fail" crap is relatively new. And it's nonsense, imo. Read this. I agree with a great deal of what is in this book, by the way. And maybe this, which I also agree with, mostly. Both of those chaps are involved in this. And that is pretty much the way to look at things, imo.

Norman D Gutter · Feb 2, 2009

Rather than the government taking over the banks, the better thing to do would be to break up the banks into smaller units. A law passed sometime in the 1990s (I think it was) allowed for the great enlargement of the banks. My mind is foggy right now and I don't remember what exactly the legislation was and what it allowed in the way of bank combinations.

If the banks currently are "too big to let fail", does it make sense to allow them to get bigger, either through taxpayer-financed acquisitions or through government take-over? Seems to me we should reverse that legislation, which history has proved to be a disaster, and go back to something similar to what we had before.

NDG

ColoradoGuy · Feb 2, 2009

robeiae said:
. . .

But saying I want to "leave everything alone, all the time" is disingenuous of you. In my post, I specifically noted that their are things to be addressed in corporate structures. And you damn sure know that I think there are things to address in government. So, your characterization is kind of a cop-out.

However, I do think companies must be allowed to rise and fall. For most of US (and world) history, this has been the case. Take a look at the largest companies at various moments in the past and see how many of them are gone with the wind in relatively short order. This "too big to fail" crap is relatively new. And it's nonsense, imo. Read this. I agree with a great deal of what is in this book, by the way. And maybe this, which I also agree with, mostly. Both of those chaps are involved in this. And that is pretty much the way to look at things, imo.

Thanks for the links -- very interesting. But I wasn't so much being disingenuous as giving you a playful poke. And you're correct -- much of economics is ideology. I know my ideology (which comes from equal parts of my education, my family history, and my religion) affects my view of economics, economic history, and history generally. But as a practical matter, I think it's clear our citizenry demands intervention. What we are discussing is the kind of intervention.

To me, though, nationalizing the banks is, in fact, a form of allowing them to fail. It's just a different form of bankruptcy. The people, us, who are now putting in all the money should own them, clean house (which will mean mass firings of those at the top), and then sell them back to somebody else at a profit, just as was done in Sweden. What we're doing right now seems the worst of both approaches.

By the way, here's a neat summary of the New Deal controversy. It's kind of a variant of the bit from Annie Hall about what sex three times a week represents -- "constantly" or "hardly ever." It plots log of GDP vs year.

Don · Feb 2, 2009

robeiae said:
However, I do think companies must be allowed to rise and fall. For most of US (and world) history, this has been the case. Take a look at the largest companies at various moments in the past and see how many of them are gone with the wind in relatively short order. This "too big to fail" crap is relatively new. And it's nonsense, imo. Read this. I agree with a great deal of what is in this book, by the way. And maybe this, which I also agree with, mostly. Both of those chaps are involved in this. And that is pretty much the way to look at things, imo.

This isn't all that new, actually. Some people saw the problem long ago. For example, here's what the Dean of Science Fiction had to say on the issue in 1939 -- seventy years ago.

Robert A. Heinlein said:
There has grown up in the minds of certain groups in this country the notion that because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary to public interest. This strange doctrine is not supported by statute or common law. Neither individuals nor corporations have any right to come into court and ask that the clock of history be stopped, or turned back.

Last sentence bolded to emphasize the point that it's the bankers who are living in the past.

As for nationalizing the banks. Fail. Worst. Idea. Ever. In 1913, FedGov created a monetary system that has given us a dollar worth a nickle in purchasing power today. In less than 100 years they've destroyed ninety-five percent of the value of a dollar. We're supposed to believe that this same group, who gained power by pandering to the lowest common denominator, can step in and suddenly reverse almost 100 years of dismal performance by becoming even more in control of the financial system?

Let's find a few nannies who have a history of beating children, and let them adopt the children they've been beating. The logic is the same.

blacbird · Feb 2, 2009

Norman D Gutter said:
Rather than the government taking over the banks, the better thing to do would be to break up the banks into smaller units.

If the banks currently are "too big to let fail", does it make sense to allow them to get bigger, either through taxpayer-financed acquisitions or through government take-over? Seems to me we should reverse that legislation, which history has proved to be a disaster, and go back to something similar to what we had before.

But . . . wouldn't this be, like . . . GOVERNMENT REGULATION?.

caw

robeiae · Feb 2, 2009

ColoradoGuy said:
To me, though, nationalizing the banks is, in fact, a form of allowing them to fail. It's just a different form of bankruptcy. The people, us, who are now putting in all the money should own them, clean house (which will mean mass firings of those at the top), and then sell them back to somebody else at a profit, just as was done in Sweden. What we're doing right now seems the worst of both approaches.

1) We shouldn't be putting in all that money.
2) It's not a given what will happen if they do fail. Or even that they will fail. Again, the current incentives all go in the wrong direction for success. I'm not sure why people just accept that there's "nothing that can be done" by the companies, themselves. We're giving in to fear, imo.
3) Have you seen this?

ColoradoGuy · Feb 2, 2009

robeiae said:
1) We shouldn't be putting in all that money.

But we did. Now what?

2) It's not a given what will happen if they do fail. Or even that they will fail. Again, the current incentives all go in the wrong direction for success. I'm not sure why people just accept that there's "nothing that can be done" by the companies, themselves. We're giving in to fear, imo.

I agree in large measure. All the incentives do go the wrong way. But along with sweeping out the old management (and attitudes that went with it) there need to be structural changes -- and regulations. I kind of like Norman's suggestion upthread that letting these banks get too big (and thus "too big to fail," whatever that means) was not a good idea. So maybe we should break them up, too.

3) Have you seen this?

Yes, I have. I agree with most of it (even though it's in the WSJ, which I generally read for the humor value, such as John Yoo's bizarre recent editorial). I especially agree as a guy with an ordinary mortgage, one that I got with the usual 20% down, good credit, etc. We should just go back to the way mortgages have always been done. But of course, that was when the entity giving the mortgage assumed the risk for their decision, rather than passing it on to somebody else. (Interestingly, a friend of mine at Wells Fargo said they generally kept all the mortgages they originated -- if so, this was not the norm.)

blacbird · Feb 2, 2009

ColoradoGuy said:
We should just go back to the way mortgages have always been done. But of course, that was when the entity giving the mortgage assumed the risk for their decision, rather than passing it on to somebody else.

. . . who passed it on to someone else, who packaged a pile of 'em, and sold 'em to yet someone else, who consolidated more of 'em, and sold 'em to yet someone else, with vague lies and unsupportable fraudulent promises at every step of the process.

Going back to the way mortgages used to be handled (which is happening largely by default -- pun unintended, but recognized -- already) is obviously desirable. But it doesn't alleviate the immediate acute problem caused by the systemic abuses and stupidities of the past few years.

caw

Norman D Gutter · Feb 2, 2009

blacbird said:
But . . . wouldn't this be, like . . . GOVERNMENT REGULATION?.

caw

It was government regulation before that 1990s legislation. By regulation, banks were restricted from doing certain things. Suddenly they were, by regulation, allowed to do certain thing (my brain fog is still there, but I think it was that banks were suddenly allowed to provide both commercial-institutional and retail banking services). It's substituting one regulation for another.

NDG

Julie Worth · Feb 2, 2009

ColoradoGuy said:
And the recent outrages about how the banks have spent the bailout money should come as no surprise (at least to anyone besides Henry Paulson and his friends) -- after all, these are the people who got us here.

I'd like to see Obama take the worst offender and recall the loan. Let the bank go under. Then go to the other banks and ask if they want to be next.

Fullback · Feb 2, 2009

Let's start at the beginning and do this in little bites.

1. There is no Nobel prize for economics. No Nobel committee is involved in the award. It is an award, using the name of Nobel, created by central bankers to reward economists and other central bankers who, through their writing, try to legitimize central banking in general to the public.

Obviously, it works very well, since the press throws the "Nobel prize winning" phrase around without questioning it. It does exactly as designed. It enhances the image that wise, elite central bankers should be listened to and heeded. They are benign and know what is best for you about finances and currency. Nothing could be further from the truth.

I will not provide any sources or links. I urge you to discover the material yourself so you don't think that I steered you in any way. I have to warn you, though. Once you understand how and why central banking works and came into being, your view of the world will change. Just as any other animal, humans are predators or prey.

ColoradoGuy · Feb 2, 2009

Fullback said:
Let's start at the beginning and do this in little bites.

1. There is no Nobel prize for economics. No Nobel committee is involved in the award. It is an award, using the name of Nobel, created by central bankers to reward economists and other central bankers who, through their writing, try to legitimize central banking in general to the public.

Obviously, it works very well, since the press throws the "Nobel prize winning" phrase around without questioning it. It does exactly as designed. It enhances the image that wise, elite central bankers should be listened to and heeded. They are benign and know what is best for you about finances and currency. Nothing could be further from the truth.

I will not provide any sources or links. I urge you to discover the material yourself so you don't think that I steered you in any way. I have to warn you, though. Once you understand how and why central banking works and came into being, your view of the world will change. Just as any other animal, humans are predators or prey.

I know that. And the other prizes were endowed by the inventer of dynamite. But, in spite of that nicety, common English usage is to call it the Nobel Prize in Economics. By the way, it's okay to use a little larger bites, especially ones containing evidence to support your opinions. We're not that dumb here.

Don · Feb 3, 2009

Fullback said:
I will not provide any sources or links. I urge you to discover the material yourself so you don't think that I steered you in any way. I have to warn you, though. Once you understand how and why central banking works and came into being, your view of the world will change. Just as any other animal, humans are predators or prey.

Spot on. The politicians created this monster in 1913 and it's stolen 95% of the value of a dollar since then. Why would we want to hand even more control over to the politicians who did that to us in the first place?

Ah, well, many abused spouses return to their mates because all they've ever seen are abusive relationships.

John Paton · Feb 3, 2009

Fullback said:
Once you understand how and why central banking works and came into being, your view of the world will change.

New World Order ??

robeiae · Feb 3, 2009

Fullback said:
Obviously, it works very well, since the press throws the "Nobel prize winning" phrase around without questioning it. It does exactly as designed. It enhances the image that wise, elite central bankers should be listened to and heeded. They are benign and know what is best for you about finances and currency. Nothing could be further from the truth.

I will not provide any sources or links. I urge you to discover the material yourself so you don't think that I steered you in any way. I have to warn you, though. Once you understand how and why central banking works and came into being, your view of the world will change. Just as any other animal, humans are predators or prey.

Don said:
Spot on. The politicians created this monster in 1913 and it's stolen 95% of the value of a dollar since then. Why would we want to hand even more control over to the politicians who did that to us in the first place?

Ah, well, many abused spouses return to their mates because all they've ever seen are abusive relationships.

Um, yeah.

You guys are wandering dangerously close to tin-foil hat territory. That's okay, if it's where you want to be.

This has plenty of great info and interesting analysis in it. It also has plenty of *whiz-bang-cuckoo-cuckoo* "questionable" conclusions and outright fabrications.

Don · Feb 3, 2009

robeiae said:
Um, yeah.

You guys are wandering dangerously close to tin-foil hat territory. That's okay, if it's where you want to be.

This has plenty of great info and interesting analysis in it. It also has plenty of *whiz-bang-cuckoo-cuckoo* "questionable" conclusions and outright fabrications.

Yes, sometimes it's hard to separate the wheat from the chaff. However, if all you've ever seen is chaff, it's even harder to recognize that it's not wheat. You don't have to believe in lizard men to believe government-mandated currency monopoly is inimical to freedom.

Thanks to our excellent educational system, many people are not even aware there are alternatives to government-mismanaged central banking systems that are designed to consolidate wealth in the hands of the managers.

Thus my argument that many abused spouses return to their mates because all they've ever seen are abusive relationships.

robeiae · Feb 3, 2009

Don said:
Yes, sometimes it's hard to separate the wheat from the chaff.

Perhaps, but the book I cited certainly seems to have a great number of Mises-oriented supporters.

Furtive history (DH Fischer's term) is--for the most part--bad history. Grand conspiracies designed to protect institutions for all times just don't mesh with reality. People don't operate like that. Generally, they operate for their own self interests, nothing more. And when they DO subscribe to grandiose dreams, they tend to be pretty open about it, from what I can see (the dreams and goals, anyway).

As an aside, the Amazon reviews for The Creature are a riot. This bit in one of them almost killed me:

What I've learned from this book is that very intelligent people,
(and G. Edward Griffin certainly qualifies), are particularly susceptible to ideology. Readers who want to nurture or reinforce their belief systems will give this book high reviews. People who absolutely
must know the truth of the world they're living in should read
Naomi Klein's "Shock Doctrine".

Bwahahahahahahahaha!!!! The "truth of the world" is in Shock Doctrine?!?!

Bwahahahahahahahahahahahahahahahahaha...ha...haha...ha...

*sigh*

ColoradoGuy · Feb 3, 2009

robeiae said:
Bwahahahahahahahaha!!!! The "truth of the world" is in Shock Doctrine?!?!

Bwahahahahahahahahahahahahahahahahaha...ha...haha...ha...

*sigh*

Even I think Klein's book is lunatic fringe material. So you know it's way out there.

Bravo · Feb 3, 2009

why is naomi klein a lunatic now?

robeiae · Feb 3, 2009

Bravo said:
why is naomi klein a lunatic now?

I don't know that she's a lunatic, myself. What I do know is that her book, The Shock Doctrine, is a polemic. So someone claiming that it contains "the truth of the world" makes me laugh.

Bravo · Feb 3, 2009

Bravo & Naomi

:Hug2:

Bravo & Chomsky

:e2stooges

Chomsky, Rob, Naomi

Nationalize the banks outright

I've seen worse.

Touch and go

I've seen worse.

haz a shiny new book cover

Touch and go

Engineer Sonneteer

I've seen worse.

All Living is Local

Touch and go

I've seen worse.

Engineer Sonneteer

What? I have a title?

I've seen worse.

All Living is Local

carn the mighty hawks !!

Touch and go

All Living is Local

Touch and go

I've seen worse.

Socialitest

Touch and go

Socialitest