"But his [Obama's] two main arguments aren’t actually very good."
-- Paul Krugman
http://krugman.blogs.nytimes.com/2009/02/11/obama-on-nationalization/
Doug Henwood wrote:
On Feb 11, 2009, at 4:09 PM, raghu wrote:
WHY IS OBAMA BEING SUCH A
DAMN PUSSY????
<http://www.abcnews.go.com/Politics/Business/Story?id=6844330&page=1>
MORAN: There are a lot of economists who look at these banks and they
say all that garbage that's in them renders them essentially insolvent.
Why not just nationalize the banks?
OBAMA: Well, you know, it's interesting. There are two countries who
have gone through some big financial crises over the last decade or two.
One was Japan, which never really acknowledged the scale and magnitude
of the problems in their banking system and that resulted in what's
called "The Lost Decade." They kept on trying to paper over the
problems. The markets sort of stayed up because the Japanese government
kept on pumping money in. But, eventually, nothing happened and they
didn't see any growth whatsoever.
Sweden, on the other hand, had a problem like this. They took over the
banks, nationalized them, got rid of the bad assets, resold the banks
and, a couple years later, they were going again. So you'd think looking
at it, Sweden looks like a good model. Here's the problem; Sweden had
like five banks. [LAUGHS] We've got thousands of banks. You know, the
scale of the U.S. economy and the capital markets are so vast and the
problems in terms of managing and overseeing anything of that scale, I
think, would -- our assessment was that it wouldn't make sense. And we
also have different traditions in this country.
Obviously, Sweden has a different set of cultures in terms of how the
government relates to markets and America's different. And we want to
retain a strong sense of that private capital fulfilling the core --
core investment needs of this country.
And so, what we've tried to do is to apply some of the tough love that's
going to be necessary, but do it in a way that's also recognizing we've
got big private capital markets and ultimately that's going to be the
key to getting credit flowing again.
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