Thursday, February 19, 2009

Say what, Mr. Greenspan?

Alan Greenspan, a devout libertarian from the church of Ayn Rand (that's her posing), gets in touch with his socialist side in this article from the Financial Times:

”It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring,” (Greenspan) said. “I understand that once in a hundred years this is what you do.”


Here's a better quote from fellow Republican Sen. Lindsay Graham from South Carolina:

“We should be focusing on what works,” Lindsey Graham, a Republican senator from South Carolina, told the FT. “We cannot keep pouring good money after bad.” He added, “If nationalization is what works, then we should do it.”

I've been trying to keep up with this debate about nationalization. It means the government will take the leading role in identifying which of the big banks are insolvent and then stripping out their bad assets into a separate "bad bank". On the positive side, we can once and for all end the slow death spiral among these too-big-to-fail banks. On the negative side, shareholders of these banks will get hosed.

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