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 Post subject: If Not Nationalization, Then What?
PostPosted: Sat Feb 21, 2009 7:09 pm 
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If Not Nationalization, Then What?

The question that everyone seems to be asking about the Obama administration’s plan for the financial system is: “Should the United States nationalize some banks?”

There’s been a chorus of calls for nationalization — from Paul Krugman and Nouriel Roubini to Alan Greenspan and Lindsey Graham — which thus far the Obama administration has resisted. As Roubini noted, however, the “stress test” that Treasury Secretary Timothy Geither proposed in his financial stability plan naturally leads to nationalization:

[T]he reality is that Mr. Geithner is going to confirm the insolvency of the financial system. Once we face this truth, there really isn’t much left to do but nationalize. We are not talking about the government operating the banks for the long-term. But, as was done in Scandinavia in the early 1990s, we are talking about orderly clean up, then reselling the banks to private investors.

Of course, there is the question of the political viability of nationalization. Obama has argued that “America’s different,” and won’t stand for nationalization. And as The Hill noted, federal ownership of troubled banks would play into false claims that Obama is a socialist.

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