Tuesday, February 24, 2009

His solution: More capital injections until the banks get healthy

From Clusterstock:

"
Former FDIC Head: Sorry, But Banks Are Too Big To Nationalize

William Isaacs, a former head of the FDIC, is annoyed with the chatterers who say that the banking crisis simply requires nationalization and that's that. In a WSJ op-ed, speaking as someone who's "done this before", he argues that nationalization wouldn't work for us and that the Swedish model is a joke. Basically it boils down to the biggest banks being way too big, with our top 10 institutions controlling some 2/3 of the nation's banking assets.

He notes

  • Nationalization would be contagious. Once you do it to a few banks, the shorts and speculators would go after the others, forcing the same fate upon all of them.
  • There's no reasonable exit strategy. There aren't any obvious buyers, except perhaps foreign money, which would be undesirable for national security reasons.
  • Replacing management would be tough. If you decapitate senior management at so many banks, who has the experience to run institutions of this size and complexity?
  • Sweden, he says, is completely irrelevent, given its size and the fact that it nationalized only after its major bank had collapsed.

His solution: More capital injections until the banks get healthy, a la yesterday's announcement from the Treasury and the Fed."

Me:

Don the libertarian Democrat (URL) said:
That's great. The banks own us. What a system. And when they're healthy, after all this, he believes we should forgive and forget I suppose. He believes that the American people are going to accept this result. Forget about Sweden, he proves that the joke is on us. It's good to know that the "Can Do" American Spirit still exists. In history books, that is.

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