I understand the extreme reluctance the Obama administration has about outright nationalizing the banks, and if they ultimately decide that they have no other choice I will understand it if they desperately try to avoid using the words: ‘nationalization of the banks.’ But, whatever you call it, I can’t see any other way to solve our financial crisis. We have banks that have debt obligations far in excess of their market value. It would far cheaper to buy these banks than to bail them out. And, who would buy them when they are worth billions less than nothing?
Our financial sector LOST ALL THE MONEY and then went and lost more. How do you recover from a situation like this? You can’t just let them all fail or we’ll have no one to loan money and everything will collapse. But you can’t rescue them either. It would cost more than our entire annual federal budget just to buy up their debt. The only solution is to have the government take an ownership stake in the banks, just as the banks repossess your property when you can’t pay your bills.
Creating a ‘Bad Bank’ won’t work because it will only accelerate the destruction of the value of the banks as they sell off their crappy debt at below true price. One way or the other, the shareholders are well and truly fucked, and we just need to come to terms with that and deal with it.
The interesting part is that it seems that George W. Bush killed capitalism. I think capitalism can be rebuilt, but not until we come to terms with the size of this failure. And, needless to say, the Republicans in this country are not going to want to accept reality or accept blame. Expect the next four years to be filled with right-wing ravings about the Europeanization of America. And, of course, all the blame for this will be placed on the people charged with cleaning up Bush’s mess.
