Slog

News & Arts

Line Out

Music & the City
at Night

« Every Librarian Should Have One | Notes from the Unemployment Line »

Tuesday, February 10, 2009

Economy Whoops

Posted by Brendan Kiley on Tue, Feb 10, 2009 at 2:05 PM

hilzoy over on Obsidian Wings who makes a strong, market-friendly case for nationalizing the banks:

I am not, in general, in favor of the government controlling individual banks. But in this case, if we don't want to let the large banks declare bankruptcy, we need to provide some serious disincentives to their managers, investors, and bondholders. (I exempt depositors since I think that they should be insured, given the systemic value of avoiding bank runs.)

Nationalization would accomplish that. It would wipe out the shareholders and holders of unsecured debt, which is what the market would have done if left to its own devices. It would allow us to replace the senior management at the banks, which would give them every incentive to avoid needing to be nationalized. We would need to own the banks in order to do what needs to be done, and to do it as quickly as possible. This would mimic the market by treating the government as an owner in those cases in which it is, in fact, putting up the money: anyone else who provided this sort of capital would get ownership, and making an exception for the government would make government money more attractive than private capital. This would, I think, be a bad thing.

It goes on.

This post edited for idiocy since it first went up.

Comments (9) RSS

Oldest First Unregistered On Registered On Add a comment

The stock market isn't a very good indicator of the effectiveness of political action. It might be if traders were calm, rational people, but they're not. They're a bunch of skittish bunnies, bolting at the slightest sign of danger, and slowly poking their heads back afraid that the boogeyman is still there.

No, no, no, the important measures can't take place until the new plans are in effect for a couple months. If we're still hemorrhaging jobs like a hemophiliac in a knife fight, then it's not working.

Posted by Gitai on February 10, 2009 at 2:13 PM

National Socialism is the key!

Posted by Adolf Hitler on February 10, 2009 at 2:15 PM

It's all to little too late boys and girls. The country is on the decline and there is no way out. The one time mulligan we got was the New Deal and the GOP and centerist Democrats (think Bill Clinton) destroyed what was left of that.

No nation has EVER stopped their decline to a second and third rate economic power. But it will be fun to watch nothing but fitfull efforts and tries. All of which will fail.

Thank you for shopping Sears!

Posted by Cato the Younger Younger on February 10, 2009 at 2:18 PM

Krugman thinks the stimulus package is too small, not the bailout (he doesn't know what to make of the bailout). Does the distinction matter? I don't know. Why not ask Paul?

Posted by minderbender on February 10, 2009 at 2:23 PM

We've got the bomb.

Posted by Lloyd Clydesdale on February 10, 2009 at 2:25 PM

@4 is right, Brendan; you are confusing the stimulus package vote, more or less a known quantity, with Tim Geithner's probably too-soon announcement of his Financial Stability Plan today. The Dow shot up 400 points after Geithner was announced as Treasury Sec, and gave up those gains today when Geithner debuted his much vaguer fiscal policy, which he said would still need to be hashed out over the next month or so.

Did you even read your own block quotes before posting?

Posted by whoops is right on February 10, 2009 at 2:30 PM

Thanks, OBAMA

Posted by just when I think my 401K couldn't go any lower on February 10, 2009 at 2:40 PM

What ever happened to clawback of executive/CEO compensation (salary, bonus, retirement, options) based on misstated earnings (aka "LIES")?

With compound interest?

And jail terms plus fines of treble the fines?

Posted by Will in Seattle on February 10, 2009 at 2:53 PM

Cato delenda est.

Posted by smade on February 10, 2009 at 3:20 PM