Stiglitz: The Only Way to Avoid Wasting Many Billions More: Take Over the Banks

[G_j]

http://www.alternet.org/workplace/130535/the_only_way_to_avoid_wasting_many_billions_more%3A_take_over_the_banks/


The Only Way to Avoid Wasting Many Billions More: Take Over the Banks
By Joseph Stiglitz, The Nation. Posted March 7, 2009.

American banks have polluted the economy; it's a matter of equity and efficiency that they now be forced to clean it up.

The news that even Alan Greenspan and Senator Chris Dodd suggest that bank nationalization may be necessary shows how desperate the situation has become. It has been obvious for some time that a government takeover of our banking system -- perhaps along the lines of what Norway and Sweden did in the '90s -- is the only solution. It should be done, and done quickly, before even more bailout money is wasted.

The problem with America's banks is not just one of liquidity. Years of reckless behavior, including bad lending and gambling with derivatives, have left them, in effect, bankrupt. If our government were playing by the rules -- which require shutting down banks with inadequate capital -- many, if not most, banks would go out of business. But because faulty accounting practices don't force banks to mark down all their assets to current market prices, they may nominally meet capital requirements -- at least for a while.

No one knows for sure how big the hole is; some estimates put the number at $2 trillion or $3 trillion, or more. So the question is, Who is going to bear the losses? Wall Street would like nothing better than a steady drip of taxpayer money. But the experience in other countries suggests that when financial markets run the show, the costs can be enormous. Countries like Argentina, Chile and Indonesia spent 40 percent or more of their GDP to bail out their banks. For the United States, the worry is that the $700 billion appropriated for the bank bailout may turn out to be just a small down payment.

The cost to the government is especially important, given the legacy of debt from the Bush administration, which saw the national debt soar from $5.7 trillion to more than $10 trillion. Unless care is taken, government spending on the bailout will crowd out other vital government programs, from Social Security to future investments in technology.

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[Karenina]

1. K&R!!!

:hi:

[HamdenRice]

2. Nationalizing the banks is the only solution. Perhaps even internationalizing them.

They have to be taken over, with their balance sheets cleaned up. This can't be done privately or through a public private partnership as Gietner is suggesting because if there is any upside gain in the long run, it belongs to the taxpayer. It may be necessary to take them over in partnership with those countries that still have massive dollar reserves.

[RUMMYisFROSTED]

3. I'm convinced it is going to happen within the next few months.

All the signs are there.

[leftchick]

6. um

we do not have months, listening to these guys I feel like it is days. :(

[snappyturtle]

4. K&R I think nationalization of the banks HAS to happen. nt

[ConcernedCanuk]

5. Nationalizing banks is NOT the only solution . .

.
.
.

I'm not saying it is not a good idea, but it's not a "fix-all"

USA has to prioritize its spending habits

Like maybe spend more of the taxpayers taxes for it's health and welfare instead of roaming the globe with it's War-Machine?

USA IS AN EMPIRE - they have their forces on every Continent, and in over 75% of the World's Countries/States.

Better pull it back real soon - or the USA is gonna implode.

China and Russia especially are watching closely,

and are getting ready to pick up the pieces.

USA cannot continue on its present path

if it wants to survive as a nation.

That's my Canuk thoughts,

anyhoo

[Festivito]

7. It's worse than taking over the banks.

That won't bail the retirement funds we're not discussing along with the rest of the things we're not discussing.