Thursday, 12 February 2009

When you said thousands, you meant 6

Paul Kedrosky has a nice comment on the Obama take on nationalisation. Obama first, from ABC Nightline tonight:
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.
As Kedrosky says, this is at best disingenuous and at worst outright cowardice. Obama is afraid of what the Republicans will say if he does what he suspects is the right thing, and nationalises. The Thousands argument is clearly nonsense - just nationalising Citi, JPM, BofA, Wells, GS and MS would go a very long way towards resolving the problem. And the last two may not need it. So instead of both resolving the crisis and saving the taxpayer money at the cost of employing the N word, we instead have the Geithner compromise, three ineffectual prongs that run a serious risk of failing to prick the crisis.

Update. Maureen Dowd also puts it nicely. She has a nice opening to an article in the NYT. So much for the savior-based economy. She's right. As she says, there is
a weaselly feel to the plan, a sense that tough decisions were postpone...

Geithner is coddling the banks, setting it up so that either we’ll have to pay the banks inflated prices for poison assets or subsidize investors to pay the banks for poison assets... Geithner prevailed over those who wanted to kick out negligent bank executives and wipe out shareholders at institutions receiving aid.
Just as Gordon Brown's association with James Crosby, Fred Goodwin and Shriti Vadera is currently proving difficult and embarrassing, so I predict will Obama's promotion of Geithner will come back to haunt him.

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