A Bank Bailout That Works

Once again, Joseph Stiglitz is offering his considerable opinion as to what needs to be done in tackling our financial crises. His current article at The Nation is both rational and sensible. Read it here and see how relatively simple his solution is. Of course, the bank lobby won't like it.

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Stiglitz, Krugman, Roubini

There are a series of experts calling for a modified Sweden model at this point. Well, they were calling for it when the first bail out came up and no one listened...

I personally think these various economists should be enlisted by the Obama administration to set this system up.

It's obvious they need to bankrupt, restructure, nationalize these institutions and plain throw out anyone who wants to keep the Ponzi scheme going.

I appreciate the warnings he mentions when getting private hedge funds etc. to "deal with the toxic assets" on how they will screw the taxpayer, nation, pocket the profits somehow plus move them offshore.

The sensible ones.

Yeah, add Reich to the list and there are any number of investment analysts you could add too. But the thing I liked most is that Stiglitz takes the good bank approach of determining the good assets as the basis for the ongoing bank. This considers the welfare of the taxpayer first but also saves a functioning banking system. It is the good bank that receives the government/taxpayer assistance.

The toxic assets are left for the shareholders, bondholders and the old bank management to deal with in the open market. It seems a subtle difference to start from a position of protecting the good assets, as opposed to finagling over how to value and what to do with all those bad assets. The difference in outcome is that taxpayer money is only going to institutions which have a high probability of surviving and are structured to participate in economic recovery.

That's the kind of policy change I can embrace.

most of the people making sense are not in power

I note that most of the people who really know what to do here are not in power. It appears Volcker knows what's going on, probably Jared Bernstein, but why these people are not part of at least an adviser panel or something to craft a solution is beyond me. Another is Bill Isaacs....

It's pretty clear also there is major pressure to get rid of Geithner. Now if "wall street" is calling for his head, eh, I question their motivation! With the mother of all financial meltdowns on their hands I don't think this is the time for on the job training. If it was a different time he wouldn't be in such a pickle.

Economist Alan Blinder, New York Times, Op-ed

Nationlize the Banks, not so fast

Blinder argues against nationalizing the banks but I think the issue here is, as far as I know, most are not talking about completely absolute, every bank in the U.S. is nationalized...

just the TARP recipients or at least the large ones.

I begin to wonder

If decentralization needs to happen- a return to in-state banks that are limited to the states they are licensed in, and break up the FED into 50 smaller pieces also.

Moral hazards would not exist in a system designed to eliminate fraud.

Maximum jobs, not maximum profits.