Sen. Charles Schumer (D-N.Y.) believes that failed "zombie" banks, no matter what their size, should be taken over by the government, which should then wipe out shareholders, fire management, clean up the banks and quickly resell them into the marketplace. Such a move, he cautioned, should come only if the "stress tests" being conducted by Treasury Secretary Timothy Geithner determine a bank to be insolvent.
In an interview with the Huffington Post, Schumer sought to clarify and elaborate on widely-reported comments he made last Sunday on ABC's "This Week."
During the show, Sen. Lindsey Graham, a Republican from South Carolina, turned a few heads by stating that nationalizing the banks should be a policy option on the table.
Responding a few moments later, Schumer said on ABC, "I would not be for nationalizing. I don't think government is good at making these decisions."
In addition to growing support for the "Swedish" nationalization model (depicted in the first blockquote paragraph), it is also becoming clear that whether or not Treasury Secretary Geithner intended the "stress test" to be a back door toward nationalization, it almost certainly will become a back door toward nationalization. By early to mi-April, when the stress test and quarterly reports show which banks are solvent and which are not, there just won't be any other options left from either a pure policy or political perspective.
Perhaps one of the keys to pushing nationalization over the finish line is, as Atrios and Josh Marshall both suggest, to stop calling it nationalization. In order to win this fight, perhaps something like "the receivership plan" or "the Swedish model" should become standard lingo for all of those who favor what we are now terming "nationalization."
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