When Sen. Lindsey Graham announced on national TV that the U.S. should at least consider nationalizing banks, he drew scorn from a lot of fellow Republicans.But today Graham picked up an ally who's held in esteem by Republicans as well as Democrats.
”It may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring,” former Fed chairman Alan Greenspan has told the Financial Times. “I understand that once in a hundred years this is what you do.”
Greenspan, a free-market capitalist, told the paper that temporary government ownership would "allow the government to transfer toxic assets to a bad bank without the problem of how to price them."
Graham amplified his comments this week in an interview with the Observer. He said after federal investments such as the $45 billion the government poured into the Bank of America, nationalization should at least be on the table.
"The truth is we've put more money into the Bank of America than it's worth," Graham said. "That's not nationalization. That's just stupid."
Some online readers applauded Graham's idea to debate the issue. Others didn't.
"He just admitted Congress is stupid - not that this was unknown to the public," akhimark wrote. "Now he thinks Congress should take over banks. That's just stupid. I guess stupid is as stupid does.
(Graham's comments apparently didn't take into account that the $45 billion government investment is preferred stock, over and above the $27 billion in market capitalization.)
6 comments:
The term the Senator should've used is "receivership" -- the time honored FDIC practice of taking a sick bank out behind the barn and putting it out of its misery. Recall Washington Mutual -- if you can, because that went relatively smoothly. Contrast receivership and resolution with the "open bank assistance" of the type extended to Citi and BofA. Neither bank is very healthy and both are basically zombified.
This is why one or both of them will likely cease to exist in 09 -- no matter what we call that process.
JAT
I completely disagree with Lindsey Graham - and think of him as "chicken little" the sky is falling the sky is falling.
Alan Greenspan is certaintly not someone I would consider an ally right now - remember it was Greenspan who, when asked about the mortgage crisis simply said, "I didn't see that coming."
How could he NOT have seen it coming? I'm a simple accountant and i saw it coming 4 years ago!!!
I'd like to see more economic professors involved in this debate instead of pundits on CNN/FOX/CNBC. You listen to the CEOs -they believe they have everything under control, which is obviously NOT the case. Why isn't the brightest economists, economic professors, Volker, etc., on a panel talking to Dodd and his committee. What does DODD know about a situation like we're in? I don't think Geithner has a clue (he can't even do his taxes correctly). If he had, something would be happening. What have we seen from him? NOTHING. What is the SEC doing for inves tigations for fraud on lenders/mortgage processors/realtors that lied on applications? Lots of people need to be in jail! Why hasn't the banks OPENED their books? That should have been a REQUIREMENT for ANY TARP funds. Why invest in a company that is going to go down anyways. That is the mentality of the auto industry? What makes the banking industry any different! Any taxpayer money should be ONLINE = Recovery.com so we can see WHY and WHAT this $$ is going to be spent on, (including the PELOSI TRIP that trip was for what?). That was a HUGE mistake that more regulation - requirement was not mandatory BEFORE TARP 1 went out.
Thain and Lewis depositions: I want it public and that $$ Thain gave out, that $$ should be taken back - regardless of who it went to. The bank of sinking and he gave out bonuses? If I didn't perform in my job, I'd just be unemployed - not walking out the door with a HEFTY CHECK! And why in the world should people that are making their mortgage - barely but doing it, not being rewarded? If you are going to give special re-fi loans available for those in foreclosure, then a reward of a low % rate should be made available for those that lived in their means. I don't want to pay for someone else's poor decisions.
I wonder if all those that bought $500K houses wish they looked at $200K or less houses - just to "look successful". My house may not be fais not fancy but it's affordable with 2400 sq ft! It was a mess when we bought it at $88K but we remodeled the entire home ourselves - including a basement and nice landscaping - and we did that ourselves.
I remember my grandparents buying a home w/ 2 acres for $10K in the 70s. It was a piece of junk. My grandfather paid CASH! Slowly but surely fixed it up. I'm glad I had a role model to know if you have the $, you can buy it. If you can't afford it, too bad... SAVE UP!
I've taught my kids (25, 24, 20) the same thing. They each have ONE credit card for emergencies, one has NO SCHOOL DEBT because he paid cash, the other has $8K for school debt - neither have car loans. They drive old cars. Both work full time and go to school full time. They know the of value of a dollar. My daughter doesn't have a job pays enough for her to work and go to school, so she's waiting.
I did not give my kids EVERYTHING they wanted. If they wanted something, they paid at least half for all the "expensive" clothing/shoes they wanted and if they didn't have the money - they saved! They had jobs at 14and 16.
I feel bad for the parents that have just GIVEN EVERYTHING and ANYTHING to their kids (a new car at 16? Ridiculous). They are probably in withdrawal from mall shopping. PAY CASH!
If we don't teach the GEN Ys how to handle money, what kind of world will be looking at in 20-30 years?
We need some politicians that are experienced in BUSINESS not just politics. Invite the best and brightest to Congress to figure out how to maintain Capitalism - not SOCIALISM - certainly not Nationalizing our industries. Some brainstorming is needed = without the CEOs of these companies that are on the brink of disaster.
I'd like to see more economic professors involved in this debate instead of pundits on CNN/FOX/CNBC. You listen to the CEOs -they believe they have everything under control, which is obviously NOT the case. Why isn't the brightest economists, economic professors, Volker, etc., on a panel talking to Dodd and his committee. What does DODD know about a situation like we're in? I don't think Geithner has a clue (he can't even do his taxes correctly). If he had, something would be happening. What have we seen from him? NOTHING. What is the SEC doing for inves tigations for fraud on lenders/mortgage processors/realtors that lied on applications? Lots of people need to be in jail! Why hasn't the banks OPENED their books? That should have been a REQUIREMENT for ANY TARP funds. Why invest in a company that is going to go down anyways. That is the mentality of the auto industry? What makes the banking industry any different! Any taxpayer money should be ONLINE = Recovery.com so we can see WHY and WHAT this $$ is going to be spent on, (including the PELOSI TRIP that trip was for what?). That was a HUGE mistake that more regulation - requirement was not mandatory BEFORE TARP 1 went out.
Thain and Lewis depositions: I want it public and that $$ Thain gave out, that $$ should be taken back - regardless of who it went to. The bank of sinking and he gave out bonuses? If I didn't perform in my job, I'd just be unemployed - not walking out the door with a HEFTY CHECK! And why in the world should people that are making their mortgage - barely but doing it, not being rewarded? If you are going to give special re-fi loans available for those in foreclosure, then a reward of a low % rate should be made available for those that lived in their means. I don't want to pay for someone else's poor decisions.
I wonder if all those that bought $500K houses wish they looked at $200K or less houses - just to "look successful". My house may not be fais not fancy but it's affordable with 2400 sq ft! It was a mess when we bought it at $88K but we remodeled the entire home ourselves - including a basement and nice landscaping - and we did that ourselves.
I remember my grandparents buying a home w/ 2 acres for $10K in the 70s. It was a piece of junk. My grandfather paid CASH! Slowly but surely fixed it up. I'm glad I had a role model to know if you have the $, you can buy it. If you can't afford it, too bad... SAVE UP!
I've taught my kids (25, 24, 20) the same thing. They each have ONE credit card for emergencies, one has NO SCHOOL DEBT because he paid cash, the other has $8K for school debt - neither have car loans. They drive old cars. Both work full time and go to school full time. They know the of value of a dollar. My daughter doesn't have a job pays enough for her to work and go to school, so she's waiting.
I did not give my kids EVERYTHING they wanted. If they wanted something, they paid at least half for all the "expensive" clothing/shoes they wanted and if they didn't have the money - they saved! They had jobs at 14and 16.
I feel bad for the parents that have just GIVEN EVERYTHING and ANYTHING to their kids (a new car at 16? Ridiculous). They are probably in withdrawal from mall shopping. PAY CASH!
If we don't teach the GEN Ys how to handle money, what kind of world will be looking at in 20-30 years?
We need some politicians that are experienced in BUSINESS not just politics. Invite the best and brightest to Congress to figure out how to maintain Capitalism - not SOCIALISM - certainly not Nationalizing our industries. Some brainstorming is needed = without the CEOs of these companies that are on the brink of disaster.
The idiot Greenspan was the one who kept interest rates too low for too long and that is what got into this awful mess.
Of course Lindsay Graham says he is a "conservative" and he is proposing socialistic ideas? It is hard to believe. If Graham thinks it will garner votes he is for it. If it will get us renewable energy, he is against it.
Graham is an opportunist, he leans as the wind blows. I would not trust Graham if I had him in arm lock and he was answering my questions, he is just like any other guy who is tortured he will tell you what you want to hear--but with Lindasy he will tell you what you want to hear regardless, he is a politician who should be retired
Thanks so much for this article, quite useful piece of writing.
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