Nationalization: To Be or Not To Be?

WERC

Below are several articles addressing the issue of nationalizing the banks. Because of the increasing severity of the economic crisis and because the banks have been given billions of taxpayer dollars but still refuse to lend money, we in the Workers’ Emergency Recovery Campaign believe the question of nationalization should be thoroughly discussed and debated. Many prominent economists are arguing that the banks can only be saved if they are nationalized. But if they are nationalized, that step raises additional questions: Why should they return to private hands if the governmen’s expertise is required to save them? And why should society be put at risk to be victimized again by bankers who are greedy and reckless?

Paul Krugman’s Op-Ed article in the February 1, 2009 New York Times, entitled “Bailouts for Bunglers,” is the latest in a series of major articles where prominent, mainstream economists have advocated nationalization or government takeover of the failed U.S. banking system.

For example, last week, (Janurary 26, 2009) CNN reported that Joseph Stiglitz, the former economic advisor to President Bill Clinton and current Columbia University professor advocated government takeover of the banks. Stiglitz asserted that with the banks owned by and under government control they would be able to deal with the bad assets more efficiently, and he added that nationalizing the banks would enable then to operate more in the national interests. But he also said that once the banks have recovered and stood on a firm financial basis, the banks should revert back into private hands.

In addition, William Greider, currently the National Affairs Correspondent for The Nation magazine and a former Rolling Stone and Washington Post editor, has recently appeared on Democracy Now! and on the PBS Bill Moyers Journal and has written an article, “The Crisis Is Global” for The Nation (January 15, 2009), where he advocates a government takeover of the banks. Greider states, “Obama and his advisers are eager to get another $350 billion in bailout funds, but they have remained silent on whether this will finance a government takeover of the system. Without such a move, the taxpayers will essentially be financing the slow death of failed institutions while getting nothing in return.”

Moreover, Rolfe Winkler, a Chartered Financial Analyst, states in an article entitled, A Bad Bank Is a Very Bad Idea, published in the New York Daily News on February 2, 2009, that “Marking down assets means losses have to be recognized. A better solution than forcing them onto taxpayers would be to nationalize the banks outright, wiping out shareholders and forcing bank creditors to absorb their share of losses.”

Paul Krugman, in his article reproduced below, echoes basically the same refrain when he says, “If taxpayers are footing the bill for rescuing the banks, why shouldn’t they get ownership, at least until private buyers can be found?”

But, it must be asked, if the banks can be run more efficiently by the government than by private owners, why not keep the banks as publicly owned, nationalized enterprises, where they would be mandated to operate in the interests of everyone and not merely in the interests of rich bank owners?

Many labor and social justice activists today also believe that the banks should be nationalized without compensation as well as have every bank relinquish all misused public funds. Then the banks can be operated in the public interest so that the small depositors’ savings are protected and loans could only be made on a socially planned and rational basis, not for the private profit of a fabulously wealthy few where everyone else’s well-being is jeopardized.

Referenced Articles

Paul Krugman, Bailouts for Bunglers, The New York Times

Joseph E. Stiglitz, How to rescue the bank bailout, CNN.com
http://www.cnn.com/2009/POLITICS/01/26/stiglitz.finance.crisis/

William Greider, The Crisis is Global, The Nation
http://www.thenation.com/doc/20090202/greider

Rolfe Winkler, A Bad Bank Is a Very Bad Idea, New York Daily News
http://www.nydailynews.com/opinions/2009/02/02/2009-02-02_a_bad_bank_is_a_very_bad_idea.html

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