In the past, I have, perhaps unfairly, mocked "Obama's secret plan theories." The basic premise of an "Obama's secret plan theory" is that candidate, and now President Obama, is employing centrist rhetoric, policy and appointments entirely as a means of political cover in order to achieve left-wing ends. Such theories are a bit of a stretch, as they imply, in the face of public statements to the contrary, that President Obama is both fundamentally deceptive and fundamentally left-wing.
Even beyond the way they contradict the public record, the real problem with "Obama's secret plan theories" is that they rely on contradictory impulses. On the one hand, they are based in the widespread perception that politicians are shifty and mendacious. On the one hand, they rely on the widespread desire to believe that our leaders actually reflect our own views. So, in the "secret plan theories," our pessimistic and optimistic inclincations toward politicians are miraculously combined into an entirely positive outlook toward a single politician.
Over the past week, I find myself in a bit of a conundrum, as there is a new "Obama's secret plan theory" floating around that I actually want to believe. Namely, the theory is that the "stress test" aspect of the bank bailout is actually a backdoor means of achieving bank nationalization. Josh Marshall summed up this theory nicely in an article two days ago (more in the extended entry):
There's been an alternative theory afoot in recent days which holds that Tim Geithner's ill-received bank rescue plan wasn't so much a plan as a holding pattern; and that the 'stress test' for banks may be the back door through which we move toward some sort of nationalization of at least some the big banks. Nouriel Roubini suggested something like this just after Geithner's speech. And now it seems that Obama too is leaving himself a decent amount of semantic and policy wiggle room to pursue such an approach.
Last week Ron Brownstein published an article based on an interview he and four other columnists were granted with President Obama. And now E.J.Dionne has published a detailed transcript of just what Obama said on the issue of nationalization.
The upshot is that Obama would not rule out Swedish model nationalization, though he clearly wants to avoid it. And the opposition to nationalization which Obama made clear early last week seems, in this interview, to be at least in part a matter of semantics, or subject to enough subsequent revision and experimentation as to bring us to the same end result. But this is a case where reading the precise words he used is key.
The logic here is strong enough that I don't want to dismiss it entirely:
President Obama has considered the "Swedish model" of bank nationalization (that is, paying off the depositors, wiping out the shareholders, closing the bank, placing it into a receivership, and then selling the bank back to the private sector) as an approach to take with the bailout.
President Obama has refused to rule out this model of bank nationalization as a future response to financial sector difficulties.
It doesn't make sense to announce bank nationalization as a strategy, as the gap between the announcement of the strategy and the implementation of the strategy would create real economic chaos. In this area, I agree with another post by Josh Marshall. If you are going to nationalize some banks, you need to just do it, not announce it as a strategy.
The "stress test" aspect of the current bailout plan will determine which banks need nationalization, and which banks do not. From that point, and only from that point, would nationalization of some banks become a viable option.
That... actually... kind of... makes sense. However, there are some problems with it:
Geithner and Summers: The pattern of behavior from Geithner and Summers so far makes it pretty clear that they would never support nationalization. Geithner has even made direct statements to this effect. As such, in order for bank nationalization to occur, President Obama would have to order it against the direct wishes of Geithner and Summers. This just doesn't seem very likely to me, as those two are winning a lot of arguments inside the administration these days.
Would there be any money left?: By the time the "stress test" makes it clear which banks need to be nationalized and which ones do not, it is possible that there won't be enough money left in the TARP program to nationalize the banks that need it. Most of the money in the program has already been spent. Further, Congress, even one which wide Democratic majorities, is not going to approve more money if it is to be used for bank nationalization. So, there might not be any money to nationalize the banks.
Overall, the secret plan to nationalize the banks theory is tempting, but it still doesn't seem very likely. However, hanging our hopes on a secret plan theory might be all that we have. As such, perhaps my sympathy and understanding for such theories has grown over the past week.
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