Greenspan backs bank nationalisation [joins Graham, McCain, Obama, and others] [Socialist agenda]

Washington. The US government may have to nationalise some banks on a temporary basis to fix the financial system and restore the flow of credit, Alan Greenspan, the former Federal Reserve chairman has told the Financial Times.

In an interview with the FT Mr Greenspan, who for decades was regarded as the high priest of laisser-faire capitalism, said nationalisation could be the least bad option left for policymakers.

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

Mr Greenspan’s comments capped a frenetic day in which policymakers across the political spectrum appeared to be moving towards accepting some form of bank nationalisation.

“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 nationalisation is what works, then we should do it.

Very good.

Is the $300 billion of capital from private sources you refer to the amount of new capital raised by bank companies during a recent period.? If so it almost included me. I decided however to keep my money in cash, the value of which however is also eroding daily.

What would get me as an investor to re-invest in the stock market?

It wouldn't be for the government to prop up the Citibanks (really, Sanford Weil, Commercial Capital, Primerica, and Travelers) or Bank of Americas (really Nationsbank and more other acquired banks you can shake a stick at) of the world.

It would be to give an opportunity for the smaller banks who successfully stuck to their knitting, and new entrants whether vulture capitalists or foreign banks or specialized-industry finance companies to buy into our credit markets, and allow over-all credit to start to trend downward. And it would be to give taxpayers small equity stakes in the banks or bank assets emerging out of government receivership.

I work for people who risk their money in good faith. I have no truck with CEO empire-builders.

Yes, on the recent capital raise figures.

I really don't care what it'd take you to invest in the stock market. Those with the guts to do so now will be rewarded, and those without will not. Investors do not compete with the state of the world, but with each other. The darkest times, not perfect ones, are the best to invest, because things do improve from them, etc. I don't want you to do anything, for me or anyone else, such that I must listen to you or go out of my way to please you or induce you to do anything. Your skin.

If the government does not prop up the major banks, none of the others would remain open at this instant. Last fall, every regional bank in the country was failing, regardless of their past conservatism about loans (which is decidedly overrated, incidentally), simply because they have to compete with every credit on the planet to raise funds. Last fall, the bond markets and commercial paper markets were completely closed to them, as rates hit 15% and upward for financial names. They largest and strongest paid 10-12%, and smaller ones did not pay less, they paid more.

Objectively, the larger banks are not less sound but more so, despite the epic levels of slander directed at them. They hold bad assets because every deadbeat on the planet who defaulted ending up forking over collateral to them, not because they were reckless to start with. Some, such as Bank of America, are only in any difficulty because they attempted to assist the Fed in dealing with the mess (supporting Merrill in their case, and before them, Countrywide. BofA itself was and remains entirely sound, it is only fears over Merrill losses dragging them down recently).

Moreover, some of the most slandered banks have simply been earlier and more honest about all of it than others, and have reacted appropriately. Citi is a case in point. They have been cash flow positive for three quarters running now, and are forcing an epic positive cash flow in their direction of $45 billion per quarter. Their losses are all mark to market and loss provisioning. Yes they also have higher write off of actual bad debts, but all of them much less than they earn on their book of business.

The government supporting both is throwing good money after good, not after bad. Few other institutions would survive the failure of either, and neither deserves the epic crapstorm being hurled at them by the pols and the deadbeats.

You won't fix any of it by trying to stick more losses onto them or onto other financial names. You won't fix any of it by trying to make a buck for the treasury squeezing and niggling and diluting them. The longer that mentality continues, the less money financiers make and the less capital is attracted to replace what was impaired. The treasury will make 35% of all the future profits of all banks, doing nothing, and a similar share of all of their positive externalities, wages to workers, etc. It is mindless uneconomic idiocy for the government to try to enrich itself at the expense of its own citizens and private institutions.

If everyone involved bends over backwards and pulls out every stop, trying to make bankers as filthy rich as possible without deserving a dime of any of it, then it is barely possible we may re-attracted to finance the capital withdrawn from it over the last year and a half, in another year and a half. And get through the mess thereby. If, instead, populist idiocy prevents and delays this, then populist idiots can languish in poverty indefinitely, as long as they jolly well please.

But a wealthy prosperous capitalist society without fat, happy, undeserving banker-capitalists, is a round square and a misunderstanding. If bankers aren't rich, nobody else will be, either.

Law of nature. No approval or opinion required or entertained, and no more repealable than gravity.

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