. February 3, 2009 SouthAmerica: Yesterday when I was reading Paul Krugmanâs column on The New York Times all I can say is that I agree with Paul Krugman 100 percent â the US government should nationalize all these troubled banks, clean them up and privatize them again. *** The collapse of Tom Daschleâs cabinet nomination as Health and Human Services Secretary may turn out to be the best thing that happened regarding the new effort to reform health care In my opinion, Barack Obama should nominate Paul Krugman for the position of czar in charge of designing the new health care system for the US â a system that will be in sync with the new US economic and social system of the 21st Century. You can read why Paul Krugman is the best man for the job at: U.S. Healthcare in Crisis http://www.elitetrader.com/vb/showt...2&perpage=6&highlight=healthcare&pagenumber=1 ***** âBailouts for Bunglersâ By PAUL KRUGMAN Published: February 1, 2009 The New York Times Question: what happens if you lose vast amounts of other peopleâs money? Answer: you get a big gift from the federal government â but the president says some very harsh things about you before forking over the cash. Am I being unfair? I hope so. But right now thatâs what seems to be happening. Just to be clear, Iâm not talking about the Obama administrationâs plan to support jobs and output with a large, temporary rise in federal spending, which is very much the right thing to do. Iâm talking, instead, about the administrationâs plans for a banking system rescue â plans that are shaping up as a classic exercise in âlemon socialismâ: taxpayers bear the cost if things go wrong, but stockholders and executives get the benefits if things go right. When I read recent remarks on financial policy by top Obama administration officials, I feel as if Iâve entered a time warp â as if itâs still 2005, Alan Greenspan is still the Maestro, and bankers are still heroes of capitalism. âWe have a financial system that is run by private shareholders, managed by private institutions, and weâd like to do our best to preserve that system,â says Timothy Geithner, the Treasury secretary â as he prepares to put taxpayers on the hook for that systemâs immense losses. Meanwhile, a Washington Post report based on administration sources says that Mr. Geithner and Lawrence Summers, President Obamaâs top economic adviser, âthink governments make poor bank managersâ â as opposed, presumably, to the private-sector geniuses who managed to lose more than a trillion dollars in the space of a few years. And this prejudice in favor of private control, even when the government is putting up all the money, seems to be warping the administrationâs response to the financial crisis. Now, something must be done to shore up the financial system. The chaos after Lehman Brothers failed showed that letting major financial institutions collapse can be very bad for the economyâs health. And a number of major institutions are dangerously close to the edge. So banks need more capital. In normal times, banks raise capital by selling stock to private investors, who receive a share in the bankâs ownership in return. You might think, then, that if banks currently canât or wonât raise enough capital from private investors, the government should do what a private investor would: provide capital in return for partial ownership. But bank stocks are worth so little these days â Citigroup and Bank of America have a combined market value of only $52 billion â that the ownership wouldnât be partial: pumping in enough taxpayer money to make the banks sound would, in effect, turn them into publicly owned enterprises. My response to this prospect is: so? If taxpayers are footing the bill for rescuing the banks, why shouldnât they get ownership, at least until private buyers can be found? But the Obama administration appears to be tying itself in knots to avoid this outcome. If news reports are right, the bank rescue plan will contain two main elements: government purchases of some troubled bank assets and guarantees against losses on other assets. The guarantees would represent a big gift to bank stockholders; the purchases might not, if the price was fair â but prices would, The Financial Times reports, probably be based on âvaluation modelsâ rather than market prices, suggesting that the government would be making a big gift here, too. And in return for what is likely to be a huge subsidy to stockholders, taxpayers will get, well, nothing. Will there at least be limits on executive compensation, to prevent more of the rip-offs that have enraged the public? President Obama denounced Wall Street bonuses in his latest weekly address â but according to The Washington Post, âthe administration is likely to refrain from imposing tougher restrictions on executive compensation at most firms receiving government aidâ because âharsh limits could discourage some firms from asking for aid.â This suggests that Mr. Obamaâs tough talk is just for show. Meanwhile, Wall Streetâs culture of excess seems to have been barely dented by the crisis. âSay Iâm a banker and I created $30 million. I should get a part of that,â one banker told The New York Times. And if youâre a banker and you destroyed $30 billion? Uncle Sam to the rescue! Thereâs more at stake here than fairness, although that matters too. Saving the economy is going to be very expensive: that $800 billion stimulus plan is probably just a down payment, and rescuing the financial system, even if itâs done right, is going to cost hundreds of billions more. We canât afford to squander money giving huge windfalls to banks and their executives, merely to preserve the illusion of private ownership. Note: A version of this article appeared in print on February 2, 2009, on page A21 of the New York edition. .
If you truly think that government will clean the banks up after nationalizing them and then return those banks to the private sector you are an idiot. Hundreds of high power government jobs will be created to nationalize the banking industry. Do you think once the economy turns around and the balance sheets start looking good government will decide to get rid of these powerful government banking jobs? Once again if you believe that you're an idiot.
I agree. Nationalize these retarded banks/insurance cos. and teach the greedy stockholders a lesson... Fire or put in jail the top crooks, and do NOT let them work in the business for the next 10 years. CONFISCATE ALL BONUSES of the last 5 years beyond $2 mil/year!!!! At once. How is the system supposed to fix itself if the thieves just walk? Not even a slap on the wrist!