This seems a tad strong... (0.00 / 0)

If President Obama moves forward in giving another $250 billion, or even $750 billion to Wall Street without temporary nationalization, his approval rating will drop under 50% in a matter of weeks.

My guess is that if you changed the polling question to describe three possibilities:
1. Nationalization
2. Current Plan
3. Do nothing/let e'm fail

Number 3 would win. My sense is people are against putting more money in these banks however you do it: and nationalization doesn't really save the government any money since it still has to make good on all of the obligations of the banks it takes over.  

In any event I don't think it will cause him to drop under 50.  If the stock market keeps going down at some point I think he will start to drop because it will feed the perception that the economic situation is still not under control.  I don't think we are nearly there yet, though.

A minor point: temporary nationalization is not socialism.  

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by: fladem @ Mon Mar 09, 2009 at 13:30:22 PM UTC

People understand I think, that the financial sector is in deep trouble (0.00 / 0)

and that it is in need of the kind of support only the Federal government can provide. I think they understand, and you can see I mean think, by putting my polling data right here __, that people understand if the bank sector fails we will be back to soup kitchens and a lost generation.

Letting a bank fail, in my mind is buying it at its real value and taking responsibility for the debts and lending needs of the country. Temporary has to mean until such time as the economy is out of danger, and the cost of the takeover is recouped by the American people.

At its real value, when its insolvent, is close to penny stock.

--

The government has a defect: it's potentially democratic. Corporations have no defect: they're pure tyrannies. -Chomsky

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by: HousesofProgress @ Mon Mar 09, 2009 at 15:30:54 PM UTC

[ Parent ]

My polling (0.00 / 0)

data is right here  ___.  It clearly contradicts your polling data, and my pollster clearly employs a superior metholodogy...
< /snark>

My sense based on people I talk to is that people have had it with the bank bailouts, and if someone got up and said we are going to shut these banks down and give the depositors back their money they would find wide support.  Obviously I don't have anything beyond my own intuition to support that conclusion...

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by: fladem @ Mon Mar 09, 2009 at 16:07:59 PM UTC

[ Parent ]

Shut down and return deposit isnt viable. (0.00 / 0)

There are good loans still outstanding, there are pensions for former employees like tellers, there are services to offer an economy that needs credit to start reinvesting in anything. I would prefer to tell the insolvent bank that the people who wanted the profit and were willing to risk their investment, have lost their bet, and the bank is now run by auditors and managers who answer to the people until the cost of operations is paid off, at least. Pensions for tellers still flow, deposits are safe and a credit capable institution keeps its doors open.

If we call that nationalization fine. I'd be willing to pay penny stock prices so that the deal is finalized soonest. The only bailed out people are the people who didnt wreck the thing in the first place.

--

The government has a defect: it's potentially democratic. Corporations have no defect: they're pure tyrannies. -Chomsky

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by: HousesofProgress @ Mon Mar 09, 2009 at 16:58:31 PM UTC

[ Parent ]

There Is No Magic Bullet (4.00 / 1)

Everytime we hear that serious people from both sides of the spectrum think that nationalization may be the only answer and that the Obama Administration doesn't get it, I ask myself, why don't the proponents of nationalization, temporary or otherwise tell you the costs.  Is it $1 trillion, $2 trillion, $3 trillion?  I have heard all of those numbers by various pundits.

So the proposal is that the Obama Administration should propose a bill to Congress seeking authorization for up to $3 trilllion dollars to "pre-privatize" (to use the latest euphemism) all of the largest banks like Citigroup and Bank of America who are insolvent. [Or maybe these proponents suggest another source of funds.]

Let's just try to guess how many votes in Congress there will be for this proposal.  218 in House and 60 in the Senate?  Ya think?
How much fun would John Boehner and Eric Cantor have with this proposal?

Can we please be serious about this.  I doubt you could get 100 votes in the Congress and 10-15 Senators to support this proposal.  And those would be the ones willing to commit political suicide.

If politics is the art of the possible, then Obama is doing all he can. I frankly would not want him wasting any political capital on a what could only be rationally called a whimsical notion to "nationalize" or "pre-privatize" all the insolvent "too big to fail" banks.  We need health care reform; EFCA, Energy and Climate Change legislation passed first.

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by: candide @ Mon Mar 09, 2009 at 14:53:23 PM UTC

I do not understand why. (0.00 / 0)

If you run your billion dollar business into the ground, but its a service thats necessary to the operation of the country's, even the world's economy, then why the heck are we thinking of paying a trillion dollars for it? It was left in their hands, because they had a "philosophy" that keeping it in private hands was the very very best way to run things.

I think the "philosophy" came after the need for 24 Billion Dollar bonuses and the most outrageous greed and profit ever seen since roman empire orgies, and not before, but thats me.

Part of the "philosophy" is that you get the "profit", because you accept the "risk." If they are unwilling to accept the risk, ie demanding bailouts, bonuses and precrash price levels for their cash, why should they be allowed to have profit?

--

The government has a defect: it's potentially democratic. Corporations have no defect: they're pure tyrannies. -Chomsky

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by: HousesofProgress @ Mon Mar 09, 2009 at 15:37:37 PM UTC

[ Parent ]

Here is the best case against nationalization (4.00 / 2)

I was at a CLE course over the weekend, and the bank bailouts were topic number 2 (topic 1 was layoffs at law firms...).  Anyway, some were suggesting that the government would be insane to nationalize the banks.  Here's why: if you take them over you have put the government on the hook for every one of that bank's obligations.  Many of these banks have billions in Credit Swaps, and the other side in the transactions would like nothing better than to see the ultimate deep pocket (Uncle Sam) assume responsibility for them.

Nationalization of the banks means you bailout every one of that bank's counter-parties.  

Better by far is simply to take them over via the usual FDIC process and shut them down.  In that circumstance all of the counter parties get in line for what is left of the assets.  

 

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by: fladem @ Mon Mar 09, 2009 at 16:16:32 PM UTC

[ Parent ]

we have a winner! (0.00 / 0)

That is the argument that I have been hearing about nationalization and it makes the most sense to me.

I like Krugman but does he understand how not only politically tricky but economically tricky it would be for us to nationalize the banks even it is temporary? It would be a mess and nationalization sounds good but when you stop and look at what it would mean to nationalize the banks, I see why the Obama administration has been dragging their feet.

Of course I would like some action because each day just scares me but nationalization is very very complicated.

Heck, just let the banks fail.

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by: oak tree @ Mon Mar 09, 2009 at 16:31:01 PM UTC

[ Parent ]

I'd think that an important constraint (0.00 / 0)

for any layperson in economics (I presume that you are such a layperson) to advocate for a given solution is that at least some respectable economist likewise proposes that solution.

Even granting that economists are often wrong, and sometimes even systematically wrong, surely we must expect, or at least hope, that there's enough diversity of opinion among them that the better solutions will be represented. Economics is hard. Getting the right solutions can be hard. In the end we have little choice but to act on the belief that some among them will point us in the right direction. (The only exception might be in cases in which they have all been wrong on the very issue in question -- the consequences of untrammeled globalization might be such an instance.)

If there are respectable economists who think that just letting the banks fail -- that is, doing nothing -- is the right decision, it has certainly escaped my notice. So far as I have been able to tell, they all line up for significant, proactive government action.

Hence, I don't think that just letting the banks fail can be considered a serious option, as satisfying as it might feel.

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by: frankly0 @ Mon Mar 09, 2009 at 20:22:15 PM UTC

[ Parent ]

You are failing to grasp something very important. (0.00 / 0)

It's called Reality.

Why are people as diverse as Paul Krugman and Alan Greenspan and John McCain calling for consideration of temporary nationalization, which they recognize as an extreme step?

Because there is no other proposed solution that would appear to work.

You can pretend that it is all a matter of politics and spin. But economic facts don't go away just because they've been marginalized by people who insist on playing politics on every question.

If Krugman et al are right, and nothing short of nationalization will pull us out of our economic pit, then everybody loses, and most importantly Obama and his allies will lose, because they will be perceived -- rightly -- as having provided only deeply failed leadership in a time of crisis.

Really, people who argue like this are at base no better than the right wing nutjobs they ridicule when those nutjobs take a position in defiance of logic and science.

Economics describes a reality too, and if one refuses to abide by its most basic precepts, then where is one's "reality-base"?

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by: frankly0 @ Mon Mar 09, 2009 at 19:28:18 PM UTC

[ Parent ]

it may be too late. (0.00 / 0)

A real fix for the troubles of the banking system might help make up for the inadequate size of the stimulus plan, so it was good to hear that Mr. Obama spends at least an hour each day with his economic advisors, "talking through how we are approaching the financial markets." But he went on to dismiss calls for decisive action as coming from "blogs" (actually, they're coming from many other places, including at least one president of a Federal Reserve bank), and suggested that critics want to "nationalize all the banks" (something nobody is proposing).

As I read it, this dismissal - together with the continuing failure to announce any broad plans for bank restructuring - means that the White House has decided to muddle through on the financial front, relying on economic recovery to rescue the banks rather than the other way around. And with the stimulus plan too small to deliver an economic recovery ... well, you get the picture.

Sooner or later the administration will realize that more must be done. But when it comes back for more money, will Congress go along?

http://www.nytimes.com/2009/03...

The Second Great Depression may have become inevitable the day Summers and Geitner were chosen.  

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by: Tom Wells @ Mon Mar 09, 2009 at 15:18:09 PM UTC

It may have always been inevitable (0.00 / 0)

There is no and NEVER WAS a magic bullet.  

For months the talking heads have lamented that "we need to move fast and take these toxics assets off their books".  This assumes that these banks wanted to sell these assets at a greatly discounted price.  

The idea that if Obama in January had gone to the American people and proposed the greatest bank bailout of all time, (because that is what nationalization truly is) and that suddenly Joe Average Voter would have called their Congressman and demanded action, is a joke.

The Obama/Geithner plan is based on what is politically and economically possible. It's not dreamworld stuff like Stiglitz and others are suggesting.  Where are the votes in Congress for a nationalization plan?  It doesn't exist.

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by: candide @ Mon Mar 09, 2009 at 16:18:58 PM UTC

[ Parent ]

Why does this particular (4.00 / 1)

observation of Krugman's make me feel less, not more, confident that the economy is getting the proper leadership from Obama?

so it was good to hear that Mr. Obama spends at least an hour each day with his economic advisors,

I guess I might have thought that hardly a day might pass in which Obama would fail to spend 4 or 5 hours on questions of economics, and that on most days he might spend, oh, 8 hours. I mean, it is the most important crisis facing us, is it not?

I'm just struck that, presumably, someone in the WH would use the claim of "at least one hour a day" (surely, if all of past politics throughout our history might be a guide, rather exaggerated) as something that should reassure us.  

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by: frankly0 @ Mon Mar 09, 2009 at 19:40:24 PM UTC

[ Parent ]

Just to amplify on my point, (0.00 / 0)

How many people even on this blog aren't spending at least an hour a day, and probably a good deal more, thinking about our current economic crisis? Not many, I shouldn't think.

And, I'm sure, most of us have full time jobs engaged in vastly different kinds of activities.

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by: frankly0 @ Mon Mar 09, 2009 at 19:53:35 PM UTC

[ Parent ]

And, just to further belabor the point, (0.00 / 0)

Lets do a little thought experiment.

Suppose that, in the midst of a crisis, it were observed by the Bush WH that Bush spent "at least an hour a day" meeting with his advisers about it, as a defense of his commitment to resolving that crisis.

What do you think the attitude in the left blogosphere might be to that remark?

Not good, I'd think.

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by: frankly0 @ Mon Mar 09, 2009 at 20:00:46 PM UTC

[ Parent ]

finantial fix (0.00 / 0)

Not an econimist, but...hey. As I understand it, the toxic assets (CDO's) are a much smaller part of the problem than substitute insurance (credit default swaps). These cds were invented to hide the subject matter from regulators that standard insurance requires. Due to their devious nature they are still obscure. Why can't we just pass a law that makes them court collectable only to the equal amount of premiuns paid? Because they were designed to aviod oversite, they should NOT be allowed to do such damage to the finantial system. As for the insolvent banks, and the stock market, they are both in trouble due to no invester confidence in either. Confidence will not return until something changes, meaningfull, enforced regulation(with new management?),temperary takeover, federal majority ownership? Without substantial change, why would anybody invest in these stacked decks?

Government by organized money is just as dangerous as government by organized mob..... FDR

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by: reggiewhitefish @ Mon Mar 09, 2009 at 17:15:17 PM UTC

One Caution Is That Nationalization (0.00 / 0)

is being presented as a quick and easy panacea. It seems like a good way of getting back at the greedy bankers. It really is not realistic to suggest that the disposal of the bad assets will then be solved, or to suggest that the reorganization and recapitalization can be done rapidly; the government will be stuck dealing with these mega-banks for years.

Aside from AIG, none of the big banks is getting additional TARP now, and several have said they want to return it.

I am one of those odd people who think Geithner is a pretty sharp guy  who should be given time to see what he can come up with.  But people seen to want to asshole him out the door before he has had a chance.

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by: bob h @ Mon Mar 09, 2009 at 21:31:40 PM UTC

Any idea what the party breakout is (0.00 / 0)

I mean let's play to the Dems and Independents.  Let's pay for receivership by eliminating FDIC insurance for Republicans.

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by: msobel @ Mon Mar 09, 2009 at 21:36:28 PM UTC