Dear Mr. Obama . . .

by wjw on March 14, 2009

Nationalize the freakin’ bad banks already!

You can always sell them later.

It’s the uncertainty that’s killing the markets.

What’s the problem— afraid the Republicans will call you a socialist, or something?

halojones-fan March 14, 2009 at 9:26 am

That was pretty much the plan waaaaay back in October 2008. Nancy Pelosi recognized that irrational displacement behavior was a key factor in Obama’s popularity, and made sure that things stayed bad and scary right up until November.

acpaul March 14, 2009 at 2:57 pm

Why would he be afraid of anyone stating the truth?

Slothman March 15, 2009 at 12:34 am

The problem is that the banks that are in trouble are so freaking huge that nationalizing them is not a straightforward process; the FDIC has plenty of experience in handling smaller banks. (Tyler Cowen has good commentary on this at Marginal Revolution.) If we could just bite the bullet, take the banks into receivership, and immediately turn around and sell them again after restructuring, I’d say do it (I draw the line for “socialism” at centrally planned economies and consider anyone applying the label to anything short of that to be a wingnut), but there are some legitimate concerns about the difficulty of that task.

DanielAbraham March 15, 2009 at 2:54 am


I’ve heard about the manpower shortage, but I’m a little confused by it. It’s not like a nationalized bank suddenly needs all new employees, right? Why couldn’t the banks be taken into receivership, have the same folks who work there now do the audit, and then — once we know what the balance sheets actually look like — recapitalize the bastard things and sell them off? I thought the whole point of hiding what the balance sheets look like was that the bank would fail. What’s the incentive to keep your exposure quiet if the government owns the bank and is going to keep it afloat?

Slothman March 15, 2009 at 6:33 am

The problem is that the banks that need help are very big and complicated— they aren’t just traditional banks that the FDIC is experienced in restructuring. Tyler Cowen has more; Alan Blinder prefers the good bank/bad bank approach. I think radical transparency is actually a good step to take, because as regulations go, enforced disclosure is less likely to create perverse incentives than something that constrains actions.

Lance Larka March 15, 2009 at 6:02 pm

“That was pretty much the plan waaaaay back in October 2008. Nancy Pelosi recognized that irrational displacement behavior was a key factor in Obama’s popularity, and made sure that things stayed bad and scary right up until November.”

Please explain to me how the Speaker of the House prevented the Secretary of the Treasury, the FDIC, and the Federal Reserve from doing their jobs? I mean two are independent agencies and the third works for the President. They had the tools including 350 Billion in funds that was passed by the House under the leadership of Pelosi. I’m sure if the Bush administration had put forward a plan to nationalize or actually rescue the banks the Congress would have released the other 350 Billion in October. But the administration didn’t and it appears painfully obvious in retrospect that what they did do didn’t really help things much.

Besides, things are even more “bad and scary” now. By my count quite a bit of that is from events in late Q4 (oh like the Big 3 Automakers FLYING to DC in stupidity) and in Q1 09 (several investment firms saying they need MORE bailout money). Fixing the banks last October sure would have helped things, but not the recent news.

dubjay March 16, 2009 at 7:04 am

acpaul, isn’t it weird that liberals are all supposed to be socialists now, when only a year ago they were fascists? (See Jonah Goldberg, Dinesh d’Souza, et al.)

I mean, we gotta make up our minds here. Is Obama Hitler, or is he Stalin?

All I ask is for =consistency= on the part of right-wing name-callers. Can’t they at least manage =that?=

Slothman, if the banks are essentially too big for the government to understand and cope with, doesn’t that imply that they’re also too big for their own governors to understand and cope with? (Current evidence certainly suggests this.)

Should they not, therefore, be cut down to size? Or dismembered, till the various parts can be supervised by rational people?

Slothman March 16, 2009 at 5:10 pm

Yes. The end goal should be that institutions that are “too big to fail” need to either be broken up (antitrust style) or regulated to the point that they aren’t allowed to take significant risks. We need to eliminate the perverse incentive that allows them to take big risks, profit during boom times, and then hold the economy hostage for bailout money during busts: I consider it entirely unacceptable to privatize profit and socialize risk.

My concern is that the web of financial obligations involving these corporations is effectively a Gordian knot made of bungee cord under considerable tension. If we just hack at it with a sword, we may get rather unpleasant results. I’m suggesting that we should MRI the damn thing at the highest resolution available, put the data out on the Internet for free download, and very carefully start to disentangle the thing with a maximum of smarts and judicious use of scissors.

Lance Larka March 17, 2009 at 12:48 am

dubja, I wish the right wingbats would just get the definition correct. A Liberal is (according to “open-minded or tolerant, esp. free of or not bound by traditional or conventional ideas, values, etc.”

A Fascist is (same source) “a person who is dictatorial or has extreme right-wing views.”

A Socialist(socialism) is “a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole.”

Of course someone could make the case that by nationalizing these institutions could be construed as socialism…Oh SILLY me. That apparently was the idea fronted by the administration and thwarted by the Liberals…er, I mean Democrats.

John March 24, 2009 at 11:27 pm

The main problem is that whatever solution they’re try to achieve it has to cover the back sides of the idiots who created the current situation. Barney Frank, Chris Dodd, Harry Reid and Nancy Pelosi have to come up with a solution that lets them claim they didn’t know what was going on, even though it was their job to know what was going on.

More importantly for Frank, Fannie Mae and the Democrats they have to be able to cover up the fact they are the ones directly responsible for the mortgage crises that led to the financial crisis. Of course this will also expose the Republicans who colluded with the Democrats or just looked the other way, so it’s a no win situation for all.

As for Socialist and Fascist, they’re different sides of the same coin. They both believe in the supremacy of the State. The rights of the Whole IE represented by the State over rule the individual’s rights, Period. Of course the Best interests of the People need to be looked after by an enlightened elite of course.

I know I speak for many of my fellow Vets when I say I’d rather see it all burn to the ground so we can start over.

We live in a country where the only institution the majority of people trust and respect is the military. A military that doesn’t think much of the civil government, a sentiment shared by a growing portion of the population.

Dangerous Days indeed. Yes, It can happen here.

dubjay March 27, 2009 at 4:08 am

Indeed it was the job of Chris Dodd and Barney Frank to have some idea of what was going on in banking and finance.

Of course it was also the job of Henry Paulson, Christopher Cox, Ben Bernanke, and George Bush, who were actually running the country and the financial system and who for some reason seem blameless under this scenario.

Just because I’m curious, John, what percentage of the U.S. military would violate their oaths of allegiance to overthrow a constitutionally-elected president of whom they disapproved?

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