Posted on 02/18/2009 8:45:45 PM PST by djf
Former Fed Chairman and longtime free-market icon Alan Greenspan now says nationalization of U.S. banks might be the “least bad” way forward in the ongoing financial system collapse.
In making the comment, Greenspan joined Republican Senator Lindsay Graham (R-SC), a member of the Senate Banking Committee, in testing the waters for support of the idea of letting government simply take over failing banks. Germany also this week cleared the way for bank nationalization as a last resort.
“It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring,” Greenspan told the Financial Times in an interview.
“I understand that once in a hundred years this is what you do.”
Greenspan made the comments before speaking to the Economic Club of New York this week.
“In some cases, the least bad solution is for the government to take temporary control” of banks via the FDIC or some other mechanism. Many observers have suggested a return of the Resolution Trust Corporation, an entity created to unwind the savings-and-loan crisis of the 1980s.
Such a strategy would “allow the government to transfer toxic assets to a bad bank without the problem of how to price them,” Greenspan told the FT, although he warned against forcing losses on senior creditors in any case.
“This is a credit crisis and it is essential to preserve an anchor for the financing of the system. That anchor is the senior debt.”
NYU economist Nouriel Roubini, in a column, pointed out that he predicted a year ago that bank losses would hit at least $1 trillion and possibly $2 trillion.
“At that time, the consensus among economists and policymakers was that these estimates were exaggerated, because it was believed that subprime mortgage losses totaled only about $200 billion,” Roubini wrote in the Business Standard.
It’s going to end up even worse, Roubini now says.
Before, he was counting primarily failed subprime mortgages. Now, thanks to the global recession, you have to lump in prime mortgages, credit card debt, auto and student loans, and a bevy of industrial loans and sovereign bonds suddenly at risk.
“If you think that the $2 trillion figure is already huge, the latest estimates by my research consultancy RGE Monitor suggest that total losses on loans made by U.S. financial firms and the fall in the market value of the assets they hold (things like mortgage-backed securities) will peak at about $3.6 trillion,” Roubini wrote.
U.S. banks and broker dealers are exposed to about half of this figure, or $1.8 trillion; the rest is borne by other financial institutions in the United States and abroad.
Meanwhile, he says, the capital backing the banks’ assets was only $1.4 trillion last fall, leaving the U.S. banking system some $400 million in the hole, or close to zero, even after the government and private-sector recapitalization of such banks.
LMAO!!!
Somebody oughta get a rope!
Gee, sure. Greenspan’s always been right before..
Since when does the government assume temporary control of anything? The control will be permanent.
How can you even understand what this muttering fool ever says anyway?
I never thought we'd fall so fast.
Well, he still has his supporters.
But then, so does Pol Pot!
Destroy it to save it, or whatever ...
It’s hard to believe that Greenspan was once part of Ayn Rand’s inner circle. He’s been swimming in dark waters ever since he married Andrea Mitchell.
I'm assuming by that statement that anything that we do is
going to be bad.
Goverment control of anything is the “most bad” way forward, especially
in this “on going financial system collapse”.
Hey Al,
Guess you were right about “irrational exhuberance” ...
Too bad you didn’t have the kahones to stand up to Congress ...
Suck eggs - WEASEL!!!
“Goverment control of anything is the “most bad” way forward, especially in this “on going financial system collapse”.
Unless you are the head of the government or his bootlickin’ buddy.
We need to nationalize his assets. Horse of a different color.
Mr. Greenjeans was one of the primary architects of the “non-traditional mortgage products” flood.
We’re talking sub-prime here.
Thinking, as well as mortgages.
“We need to nationalize his assets.”
Think Andrea Mitchell would kick him to the curb then?
swift and orderly restructuring? the federal government? since when has the federal government ever done anything swiftly and orderly that was actually a good thing?
I’m sure Greenspan has an acute mental disorder of some kind that is a result of seeing Andrea Mitchell without clothes too many times.
The poor old guy probably doesn’t even know where he is half the time, and probably thinks he’s a toaster.
The same government that is not even capable of balancing a simple check book or budget.
Greenspan is a Globalist....and Globalism is Liberalism with a little more money
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