Sunday, January 25, 2009

Nationalize, Don't Subsidize

More and more, one hears and reads talk that the only rational solution to the current economic crisis is to nationalize failing banks. And, frankly, it is the only thing that makes sense to us.

Dean Baker is the latest the latest to make the case:
The idea that we would give one more penny to this crew that has wrecked the economy should make taxpayers furious. There is a legitimate public interest in keeping the banks operating; a modern economy needs a well-operating financial system. But, there is zero public interest in rewarding shareholders and overpaid banks executives.

These executives bankrupted their banks and brought the economy down with them. They belong in an unemployment line, not collecting multi-million dollar paychecks in their designer office suites.

The obvious answer is to take over the insolvent banks, just as we did with the insolvent S&Ls. The government should form an RTC as we did in the 80s, which would dispose of the assets over time, collecting as much money as possible for the government. The bankrupt banks would be restructured and sold back to the private sector as soon as their books were straightened out.

The point of the exercise is not have the government run the banks, the point is to keep the financial system running without giving even more money to the richest people in the country.

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