Obama Addresses Pro-Nationalization Critics

by: Chris Bowers

Tue Apr 14, 2009 at 14:30


In what is surely a step-up from recent administrations, today President Obama directly addressed those who have criticized the Wall Street bailout because it did not temporarily nationalize some financial institutions along a Swedish / S & L scandal model. Taking left-wing arguments seriously may not be the same as progressive governance on the bailout, but it is still a nice step forward. From the President's speech:

On the other hand, there have been some who don't dispute that we need to shore up the banking system, but suggest that we have been too timid in how we go about it. They say that the federal government should have already preemptively stepped in and taken over major financial institutions the way that the FDIC currently intervenes in smaller banks, and that our failure to do so is yet another example of Washington coddling Wall Street. So let me be clear - the reason we have not taken this step has nothing to do with any ideological or political judgment we've made about government involvement in banks, and it's certainly not because of any concern we have for the management and shareholders whose actions have helped cause this mess.

Many of the arguments that President Obama addresses here sound as though they are in direct response to Open Left (I know they aren't, of course). For example, we have argued in the past that the administration is ideologically opposed to nationalization, and that the administration is being led around by Wall Street in designing their bailout plan. However, President Obama assures the country that the decision to avoid temporary nationalization had nothing to do with either ideological opposition or with coddling Wall Street. Or, as President Obama explains in the next sentence, at least it isn't ideological opposition:

Rather, it is because we believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end, and because it is more likely to undermine than to create confidence.

If nationalization isn't about concern for the shareholders who caused this mess, then why is undermining confidence listed as one of the two main reasons to avoid nationalization? Apart from shareholders, it is extremely difficult for me to imagine whose confidence President Obama is referring to in this sentence. One plausible speech is that "we didn't avoid nationalizing because we care about shareholders themselves, but instead because we care about shareholder confidence."

Even leaving aside the difficulties of interpreting such a vague statement by President Obama, the net effects of the bailout program demonstrate that it has largely been designed to shore up shareholder confidence. Even though unemployment is still rapidly increasing, and even though bailout recipients like Wells Fargo will still need tens of billions more in order to remain solvent, stocks have shown a net increase profit in 2009. About the only thing the bailout program has successfully accomplished is shoring up confidence among shareholders. Which is really what the original purpose of the bailout was back in September anyway. Modern governance is all about helping shareholders.

In the end, temporary nationalization was likely avoided by the Obama administration because there wasn't enough money available to pull it off, and the current political climate makes it impossible to get more. Any chance of pulling off temporary nationalization probably collapsed back in October, when the $700 billion was approved for the original TARP plan without any strings attached. Now, we are in a situation where we have no new regulations, and most of the $700 billion has been burned up by the same people who caused the crisis. And oh yeah, they will need billions more to stay solvent.

I still argue that the money should not have been handed out at all unless it came with strict conditions, including temporary nationalization and / or new financial regulations. There was never going to be more than one or two chances to acquire the money necessary to deal with the problem, and if we wasted the money the first time, there wasn't going to be another chance. Handing over $350 billion to Bush administration appointees pretty much guaranteed they would waste the money, and thus squander whatever opportunity there was to fix the situation. This is why it was important not to hand out the money at all unless there were strict legal guarantees on how it would be used. We never had those guarantees and, as such, we should have never handed out the money. As such, instead of just being screwed, now we are screwed and our hands our tied, too.

Chris Bowers :: Obama Addresses Pro-Nationalization Critics

Tags: , , (All Tags)
Print Friendly View Send As Email
Obama Addresses Pro-Nationalization Critics | 43 comments
If you read a few paragraphs further... (4.00 / 1)
Obama basically argues the opposite when it comes to AIG, saying that the gov. needs the powers to nationalize such institutions in order to instill confidence and get a handle on their out-of-control executive bonuses.

Still, at least Obama has come up with a better argument than his last one -- namely, that we can't do the Swedish plan because we have "thousands of banks" whereas Sweden only had six. As Krugman and others pointed out, only five or six major US banks would be at risk of nationalization anyway.

I do think the administration is right when it comes to current legislation, where they are trying to get more authority to take over (aka nationalize) big institutions like AIG. Without that power, they can't do anything other than throw money at the problem or just let the whole thing collapse.

Whose confidence? It's in the speech (4.00 / 1)
Now, I don't agree with some of the ways the TARP program was managed, but I do agree with the broader rationale that we must provide banks with the capital and the confidence necessary to start lending again.

That follows from:

The heart of this financial crisis is that too many banks and other financial institutions simply stopped lending money. In a climate of fear, banks were unable to replace their losses by raising new capital on their own, and they were unwilling to lend the money they did have because they were afraid that no one would pay it back.

So, basically, bankers are afraid to loan money.  The Obama administration believes that the threat of nationalization increases fears.  Perhaps it would be different if the government could take over every bank, but if there's only enough money to take over some banks, then what probably happens is that bankers become very risk-averse out of fear that too many loans will make their bank a target for nationalization.  And, while we would like banks to become more risk-averse, we might not want that to happen during the current crisis, just like we might want government to cut out wasteful spending, but not when there is a need for stimulus funding.

Things You Don't Talk About in Polite Company: Religion, Politics, the Occasional Intersection of Both

Interesting point (0.00 / 0)
Perhaps it would be different if the government could take over every bank, but if there's only enough money to take over some banks, then what probably happens is that bankers become very risk-averse out of fear that too many loans will make their bank a target for nationalization.

I hadn't thought of that.  Also, even if there were enough money to take over every insolvent bank, there may be some solvent banks that would be adversely affected.

Your point about the threat of nationalization is reasonable, as well.  Ultimately, it keeps the administration from being able to talk about nationalization much, which hurts the conversation.  Even if we don't care about stockholders in general, given that we aren't nationalizing we want the stock price to go up, which capitalizes the banks.

Lots of moving parts, eh?

Of course, that is the main reason to support receivership in the first place; it limits the number of moving parts.

[ Parent ]
Remember that many of those moving parts are people. (0.00 / 0)
There are massive numbers of pension funds invested in what used to be solvent strong steadily growing bank stocks and bonds. I have no idea the billions of private, state and federal unions and federations are heavily invested.

I would bet that teachers for example, have hundreds of milllions, billions in banks. Invested and hoping tpo retire after decades of teaching. One might not like it, but its there none the less.  

Change
"We must break up the banks and never again let them get so big that they distort our politics and take down the economy.

[ Parent ]
Those losses are unavoidable (4.00 / 1)
The money is lost, and as long as the banks are being run by the same incompetents who got us in to this mess, losses will continue to mount. If we want to use public money to prop up deserving pension funds we should do it directly, and not have money wasted by giving it to people who don't need it. Remember the top 10% of the country own almost all the wealth, including pension funds.
[ Parent ]
Those pensions are all lost? (0.00 / 0)
This is your assessment and your statement? They are all gone? And who do you work for?

Change
"We must break up the banks and never again let them get so big that they distort our politics and take down the economy.
[ Parent ]
If the banks lost money, it's lost (4.00 / 1)
That's just logic.

I don't work for anybody, I just don't like being asked to support a lot of wealthy people because it will help a few teachers.  

[ Parent ]
Nonsense. Just plain nonsence (0.00 / 0)
" If the banks lost money, it's lost"
Im sorry. I huess you dont understand a lot about economies ofr companies or stacks or investments. I share your anger at the apparent rewarding of those that were so greedy they contributed, worked ard for their own personal gain, while ignoring the hardship of those they were impoverishing, and their eventual destruction of the world financial system. I am angry at them their bosses and the Republicans and Blue Dog Democrats who wrote the rules so they didnt even protect the economy their were in, that was giving them their undeserved golden eggs.

I think it would be a crime to not have a massive wide ranging investigation, and a promise of jail time. Although to put an excited trader pocketing sell and buy commissions in jail for following the rules, even if he should have known better, and not put the legislations drafters in jail too seems unfair.

However.

The people who own some of these stocks, or bonds or other instruments have not lost their pensions, yet. The economy neds to rebound, but if it does then there is some hope [people can retire.

The auto sector is being worked with to try and seperate out those pensions, and there are efforts for the pre and post bankruptcy companies fund those pensions, or that new buyers assume some obligations etc. etc.  

Anger is justifiable, a demand for action is justifiable, a demand for justice against those responsible is justifiable. But to equate economic debate about the prudent ways to prevent total economic collapse,( or a run on all banks or a seven year deepening of the depression and ending the emerging progressive majority in a Republican landslide ) with the anger about greed is not clear thinking.

Yes the economic system has to be changed, even more than Washington has to change. In fact it nay be said that unless the formulation of economic law, the formation of corporations and the power of Wall Street changes, the changes in Washinmgton won't amount to a hill of beans. But we ned the system to run if we want to change it.

Change
"We must break up the banks and never again let them get so big that they distort our politics and take down the economy.

[ Parent ]
Don't privatize social security (0.00 / 0)
Nationalize 401Ks and pension funds!
[ Parent ]
Citibank has hundreds of billions (4.00 / 2)
In CDOs mostly on mezzanine MBS on outrageously overpriced real estate. Those are settling at 5 cents on the dollar. They are virtually worthless no matter what happens to the economy.

Wells Fargo has about 100 billion in second mortgages on the same overpriced real estate. That's going to be mostly gone, again no matter what happens.

All of the major banks have many billions on fraudulent mortgages. The scope was enormous. Fannie and Freddie were wiped out in a year when they briefly lowered underwriting requirements (Spring 07 to Spring 08). That money is gone too.

These losses are real but (mostly) not yet acknowledged by the banks. Somebody will have to pay for them. Legally, morally, and practically it should be investors in the banks, which means the bondholders since the stockholders are largely wiped out already.

Of course, the "strong" economy was in large part built on the credit bubble. Even if Obama "fixed" the economy (and shoveling hundreds of billions into zombie banks isn't going to help) that's not coming back. I don't think there's any large credit bubble which hasn't been followed by an extended weak economy. Can you name one?

[ Parent ]
Except (4.00 / 3)
that phrasing it as "bankers fears about nationalization" is misleading: banks already are under the "threat" of nationalization, and have been for many decades: that's what the FDIC does. If banks don't have enough assets to operate, the FDIC temporarily nationalizes them.

The only real new "threat" is the threat of nationalizing non-bank financial institutions. But, from a corporate/shareholder perspective, what's the difference between the "threat" of nationalization, and the "threat" of bankruptcy? And they've lived with the threat of bankruptcy longer even than the FDIC has been around.

So the bottom line is really that Obama is paying attention to shareholder confidence in the government extending them an indefinite life-line to prevent them having to actually take losses on their investments. It has nothing to do with nationalization - the fear is really about cutting off the promise of limitless financial industry welfare checks from the government.

But if that's the real fear in play, then it makes no sense in the context of Chris's analysis that the $700 billion is the end of the line on government bailout money. The investors driving the current rally on Wall Street must be motivated by one of two assumptions: 1) that the problem really is only one of liquidity rather than solvency; or 2) that more federal bailout money is forthcoming. I suspect most of the investors are probably implicitly (though not consciously) following #1, but the number following #2 is probably significant.

So what to do about investors betting on taxpayer losses (that's basically what #2 means). Congress has to give Obama the unambiguous authority to take over any financial institution. Any ambiguity in that authority will allow the Fed to keep #2 operative by printing another $1 trillion - and that money eventually comes out of taxes (at least the loans being backed by the FDIC ostensibly come from fees on the banks).

The good new is that Obama has unambiguously asked for the authority to take over the pertinent financial institutions. The bad news is that he shows no sign of listening to anyone outside his immediate financial advisors, all of whom have expressed a commitment not only to believing #1 above, but to further believing that the end result of government intervention should be a return to the basic status quo ante, with the financial industry remaining at the center of the economy.

[ Parent ]
I approach this from a psychological angle (0.00 / 0)
Which is good, since I am not an economist.

The possibility of bank nationalization on an unprecedented scale creates uncertainty.  In the face of uncertainty (such as what the banks currently face with the unknown value of so-called toxic assets), the natural tendency of bankers will be to turtle up and retreat into a defensive shell.  

If a bank goes bankrupt, the bankers/shareholders have a good idea of what will happen to them. Not so with large-scale bank nationalizations.  Their natural tendency will be to work toward terms with some level of certainty about the future.  Otherwise, from their perspective, better to fail and have it over and done with so they can move on to other things rather than to live as a zombie with the government pulling strings, not knowing one's future obligations.  They don't want change; they want a predictable status quo.

At least that's how I think financial people will think.  Nationalization is a bigger threat because it threatens to change everything.  If they were more open to recognizing structural flaws, then things might be different, but it seems like a perceived need for speed means that attempts at changing the financial culture of groupthink is something that will be held off until the economy has recovered.

Things You Don't Talk About in Polite Company: Religion, Politics, the Occasional Intersection of Both

[ Parent ]
Exactly the opposite (4.00 / 3)
The whole reason for the existence of the FDIC is to create certainty. Knowing that if your bank fails it will be temporarily nationalized and the FDIC will make good on your deposits allows us all to put our money in bank deposits without worrying about it. The lack of any mechanism for temporary nationalization of investment banks creates uncertainty about the fate of investment funds controlled by those banks, with the result that a series of runs on investment banks occurred last year.

The rules under which the FDIC operates specify very clear conditions under which banks are nationalized, so that banks meeting those conditions can operate with confidence that they won't be taken over. The stress tests could be used to provide the same level of confidence to banks deemed healthy under current conditions. Creating a clear mechanism for temporary nationalization of any financial institution will result in greater certainty: certainty about what will happen to institutions that are insolvent and certainty that currently healthy institutions will not be taken down by the failure of the problematic ones. A bunch of investors won't like that certainty, but that's their problem.

[ Parent ]
The act of creation creates uncertainty (0.00 / 0)
Having a clear mechanism would create more certainty.  Working towards creating a clear mechanism creates temporary uncertainty.  I'm unconvinced that the banking industry is capable right now of the long-term thinking necessary for accepting nationalization.  From their point of view, it's not clear at all that creating a mechanism for nationalization will result in a clear and predictable process, so they prefer staying the course to potentially changing the world as they know it.  Nationalization is change and people often don't like change.

Some of that is due to tightly-held free market ideology, so we're talking about government trying to force cultural shifts through regulation.  That's really not an option if you're trying to create short-term change, so I think that any changes in bank behavior that the Obama administration wants to bring about over the next year or so is going to require what amounts to bribing bankers into good behavior.

Things You Don't Talk About in Polite Company: Religion, Politics, the Occasional Intersection of Both

[ Parent ]
Madscientist Is Right (0.00 / 0)
You are consistently getting this whole thing backwards.  Which is not that surprising, as that's what the dominant narrative is trying to get you to do.

They make it seem very reasonable, but the wide of reasonable people calling bullshit is a real giveaway that it's not.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
. (0.00 / 0)
The problem is this: There doesn't have to be anything structurally wrong with a bank for it to fail. If people think a bank is going to fail then they will pull money out and the bank will become insolvent even if it wasn't insolvent prior.

that's why there is a psychological argument. That's also why the Krugman cheerleaders seem incoherent. Even this conversation doesn't address the main point. It isn't the specter of nationalization that's scary, it's the fact that your bank could be fucked by the botched nationalization of another bank. Just like most banks were fucked by Lehman brothers going into bankruptcy. The thing we have to do is sort out the good banks from the bad banks. Because we don't want good banks falling due to a confidence game. For some banks, the problem IS just one of bad timing. For other banks, the problem is that they are actually insolvent.

We get done with that, then bring on the bitching and whining about nationalization (which btw does have a bigger up front cost and therefore carries a much higher political cost than any other solution). Until then, everyone should stick to bonuses or whatever other outrage of the week is going on.

[ Parent ]
. (0.00 / 0)
Or let me put it in terms of how the process would hopefully work.

Let's say the Obama admin determines that bank A is insolvent and bank B is OK.

It's in the Obama admin's best interest to shore up B so they can stand the collateral damage from nationalizing A. (and if you don't believe in this collateral damage, look no further than the world going to hell just because Lehman brothers declared bankrupcty)

Geithner's plan hopefully will let us find out if A is insolvent and will shore up B by getting rid of toxic assets.

The next step is the mystery. But it basically relies on trusting that Obama realizes 2 plus 2 is 4 and isn't going to try to prop up insolvent banks.

[ Parent ]
Sounds Way Too Reasonable To Me (4.00 / 1)
What's wrong this President?  Doesn't he understand the need for people to get their panties in a twist all the time?  For chrissakes didn't Paul Krugman pretty much end the argument here?  We are going to hell in a handbasket.  Why doesn't Barack get that?  Why doesn't he run around like a chicken with his head cut off?

All this reasonableness from the commander in chief.  I just can't stand it!

A strawman response to (4.00 / 1)
reasonable arguments by both President Obama and Chris Bowers.  I had to look up and see which site I was on becuase it felt like Daily Kos.

Discussion of real issues based on legitimate positions sheds light on issues and principled differences.  strawmen, however, burn in the sunlight and achive little to nothing other than providing brief emotional satisfaction to the commenter.

[ Parent ]
Candide is referring to the tone of the debate. (4.00 / 1)
[ Parent ]
No, he's not (4.00 / 1)

Doesn't he understand the need for people to get their panties in a twist all the time?  For chrissakes didn't Paul Krugman pretty much end the argument here?

"The argument" being for nationalization.

I am in earnest -- I will not equivocate -- I will not excuse -- I will not retreat a single inch -- AND I WILL BE HEARD.  
[ Parent ]
. (4.00 / 2)
If nationalization isn't about concern for the shareholders who caused this mess, then why is undermining confidence listed as one of the two main reasons to avoid nationalization?

Because, believe it or not, banks contain things called deposits. And bank runs affect a fuck of a lot more than shareholders.

Bank Runs Are A Total Red Herring (0.00 / 0)
You aren't even trying, Senor Troll.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3
[ Parent ]
. (0.00 / 0)
If red herring = the whole fucking point behind bailing out banks in the first place, then I can see where you're going with this.

[ Parent ]
Confidence (4.00 / 4)
Is about avoiding bank runs.  Banking is all about confidence - you have believe the bank is sound otherwise it's over for the bank.

By bank runs, I mean not only the public coming in and demanding their deposits, but especially the bank's bondholders, many of whom are foreign creditors.

It may be picky, but he did say shareholders and not bondholders.

Well (4.00 / 5)
in fairness to Obama, and as others have remarked, the "confidence" of which he speaks might naturally be the confidence felt overall in the soundness of banks, which is necessary to get credit moving as it should.

But Obama's real howlers are contained in his completely unsupported assertion that

Rather, it is because we believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end, and because it is more likely to undermine than to create confidence.

What economist has presented anything like a serious argument that PPIP will, "in the end", both solve the banking crisis absent nationalization of some banks, and do so at less expense than receivership would entail? I can't think of a single economist outside of the Obama administration who has so argued. The most sympathetic economists I can think of, DeLong and Roubini see PPIP at best as a half way step to ultimate nationalization of troubled banks, and as, at best, a first step that may not add too much additional burden on the taxpayers overall.

And which economist outside the administration has seriously proffered the argument that nationalization is "too risky"? Given the extensive experience both here and abroad in banking systems being righted by nationalization, how does one make out a case that there is great risk involved?

I'd like to see a single serious, unbiased economist make that argument. And I'd like to see a single example of a case in which receivership for a banking crisis introduced genuine risk, and/or avoidable expense. Where is that example? Sweden? Japan? Our own S&L crisis? Where?

Now is time to demand facts (4.00 / 1)
If we don't need more significant steps to fix the banking problems, why are the stress test results being kept secret? It's good that Obama is going for a factual argument, because we can get the facts and see if he's right.
[ Parent ]
Well, that's a point (0.00 / 0)
though I rather doubt that Obama is going to feel much obligation to back up his own argument, and his claim that it's not ideology at work.

What happened after all to his "too many banks" argument? No longer operative, I gather, but I don't see any embarrassment about how it has been disappeared.

He's doing what Bush and friends used to do every time they were confronted with the badness of an argument they proffered: they simply moved on to a new, improved argument.

[ Parent ]
The speech on youtube (0.00 / 0)
Here is the speech iuts the first of five

http://www.youtube.com/watch?v... You can go here and get the other four. This link is again to the first one, the others are listed there.

Change
"We must break up the banks and never again let them get so big that they distort our politics and take down the economy.

A video response (0.00 / 0)


I am in earnest -- I will not equivocate -- I will not excuse -- I will not retreat a single inch -- AND I WILL BE HEARD.  
[ Parent ]
At the heart of Obama's "it would cost more to nationalize" (0.00 / 0)
argument is trickle-down and Laffer curves.
As funny as that sounds its nonsense. (0.00 / 0)
[ Parent ]
cant wait... (4.00 / 1)
...for this thing to blow up again...it's been entertaining.... The President believes nationalizing isn't the right remedy because Geithner didn't believe it was the correct remedy for his risk management model.  Wall Street insiders are trying to make themselves and AIG whole again, with yet another controversial move of setting aside the mark to marketing accounting rules:

The Financial Accounting Standards Board (FASB) voted yesterday to let banks ignore market prices for assets if they judge the market is illiquid and that the most recent sales are being done at firesale prices by distressed sellers. There will also be changes to allow banks to book smaller losses on impaired assets that are available for sale, which could take extra pressure off many of the biggest banks in the US.

Traders put yesterday's dramatic rally by global equity markets down to the relaxation. In New York, the Dow Jones broke through the 8,000 barrier for the first time since 9 February, before closing up 2.8 per cent at 7,978.1. In London, the FTSE 100 rose 4.3 per cent to 4,125 - the first time it has closed above 4,000 for more than a month.

The FASB was acting under pressure from Congress, which said it may legislate if the board did not ease the rules.

The Centre for Investors and Entrepreneurs, which has been campaigning for a suspension of mark-to- market accounting, welcomed the move. Its director, John Berlau, said: "By itself, this change will not make the price of mortgage assets higher or lower. Rather, it will allow price discovery to occur. Mark-to-market distorted the market by forcing banks to take losses on mortgage assets even if the underlying loans were still performing."

The issue is at the root of the problems facing banks over trillions of dollars of mortgage-related assets, many of which have not traded for 18 months. As mortgage arrears have ballooned, investors have fled the market and those who want to buy them are not keen to pay top dollar. The few early trades, at low valuations, forced all the banks holding similar assets to write off more than half a trillion dollars, sending several large players to the point of insolvency.

Since then, banks have refused to accept dramatically lower prices, believing their losses will be less if they hold the assets until all the underlying mortgages have been paid back. The stalemate, though, has led to frozen credit markets.


Chris ... (4.00 / 1)
If nationalization isn't about concern for the shareholders who caused this mess, then why is undermining confidence listed as one of the two main reasons to avoid nationalization?

If you'd read Krugman's latest book(Return of Depression Era Economics) ... you'd understand this better ... and often .. it doesn't turn out like they think ... which means we could be f-cked

Calvin (4.00 / 1)
We already are.  Check out this letter to the President.  

"We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both." - SCOTUS Justice Louis Brandeis
[ Parent ]
This Is A Shadow Play (4.00 / 2)
Obama isn't really answering his progressive critics here (not that progressives are the only ones making this arguement) any more than he answered his progressive critics on his FISA flip-flop.

He's giving the appearance of answering them, but as you've demonstrated, the answers fall apart rather quickly, once you take a closer look at them.  The operating assumption, of course, is that no one who matters is going to take a closer look.

"Asked and answered" as they lie in the trade.

We can debate about why he's taken this tact.  He may be so deep in the bubble he's actually operating in good faith.  Or he may be acting cynically.  Or maybe some combination of the two, or some other alternative.  One can make plausible arguments either way on this.  But the one thing one can't plausibly argue is that his argument here answers his critics.  It quite obviously does not.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

which we are sure to hear from his critics in the coming days... (4.00 / 1)
i don't really see how this closes down argument -- it actually seems to open it up to me...  now krugman is free to show precisely how and why obama's arguments are unconvincing...  
[ Parent ]
And that's a good thing ... (4.00 / 1)
As it sets the stage for Progressives to elevate themselves above the GOP's "socialist" rhetorical bullshit and criticize the President.

Seize the moment.

[ Parent ]
Indeed, he said a few things that are just totally wrong (0.00 / 0)
He actually had the gumption to say "nationalization," which really means receivership in real terms, is more expensive than the current "plan." Wow. One of the primary reasons for seizing insolvent banks is to save taxpayer money from being sucked down a black hole... rather like the one that exists right now.

This one is just a flat out lie in my book and a really big one to boot.

This statement alone indicates a high degree of hubris to me.

The more he keeps chugging along on the Bamboozler Express, the worse this argument will get. He's practically inviting people to refute his speeches, word for word, now.



When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.

-- Frederic Bastiat, "The Law", 1850

[ Parent ]
People do actually think that it will work (0.00 / 0)
If you asked Krugman et all they would say that the tarp will be effective for its intent.

The issue is now fixing the long term issues.  The problem is that finance should be a utility.  That it should be boring.

While a good nationalization would have been nice now financial regulation is what is important.

http://transgendermom.blogspot....

really? (0.00 / 0)
All I've seen most critics, including Krugman, say about the latest Geithner plan is that it just delays the day of reckoning and increases the ultimate cost. The Geithner plan is not big enough on its own to fill the hole in the bank balance sheets, it depends on the prices of those assets recovering to some extent. But house prices are still going down, the problems have spread to commercial real estate and the larger economy, and our economic situation is already worse than the worst-case scenario used in Geithner's stress tests.

Obama's explanation here is that he tried to get by on the cheap, critics respond using Japan as an example of the same attempts. Insufficient measures kept the zombie banks alive and prolonged the economic decay of a broken financial system, so in the end Japan spent much more to clean up nationalized banks than it would have had it acted earlier.

[ Parent ]
That was the stimulus plan (0.00 / 0)
Krugman's criticism was that the stimulus plan was not enough to replace the GDP lost.  

Which is accurate, but I don't really agree that the correct response was simply to replace the GDP lost.  I like the european strategy of simply having a social safety net that can deal with the human consequences.  

The TARP completely takes these assets off of the banks balance sheets and makes the government assume 100% of the risk.

The main issue is that it doesn't address the underlying cause and represents a pretty great moral hazard.  Its not the best solution, but going forward the real issue is financial regulation rather than nationalization.

http://transgendermom.blogspot....

[ Parent ]
This is yet another excellent oppourtunity for progressives ... (0.00 / 0)
to rise above the GOP's noise and push the Administration left. Obviously Obama will not do it on his own so people need to PUT him there. By addressing the critics on the left Obama has acknowledged some of the noise generated by progressives around the country.

What people need to realize is that progressives should OWN the platform! That means taking this speech and offer criticism that addresses why what he said regarding the banks just doesn't pan out in terms of nationalizing them (amoung other things) WITHOUT attacking the President himself as the GOP is doing. In doing so the progressives will elevate themselves by offering viable alternatives without sounding like idiots.

When I read many of these articles and comments I always come away with the same feeling. Progressives for a long time are used to losing on big items that they lose sight of when they win.

Obama just gave you a HUGE platform with this speech alone. Take advantage by changing the political tone with load but constructive criticism that will make nationalization of banks as well as major policy items that otherwise will not be politically viable. EFCA and Single-Payer healthcare are the big ticket items that I can think of off of the top.

The ultimate point I am making is that the responsibility is YOURS. This is your time. Stop the "I thought Obama said he was.... but he promised" BS.

Make him do it.

Obama Addresses Pro-Nationalization Critics | 43 comments





Donate to Open Left




blog advertising is good for you
blog advertising is good for you
LIBERAL INSTITUTIONS
STATE BLOGS
USER MENU

QUICK HITS
SEARCH

   

Advanced Search

Home | RSS/XML Feed | Register | Contact

  © OpenLeft 2007-2010, Powered by SoapBlox