Should The U.S. Nationalize Its Banking System? Live Chat At Noon
Over on NPR.org at noon, Eastern time, the Planet Money team is running a live chat on options for the US banking system. The link is here. I hope you can join us.
Update: you can watch the “replay” of this chat on NPR.org. The comments/questions were very good.
Simon – I enjoyed the live blog, but I hope that you can lay out some specific policy proposals re: breaking up the ‘too big to fail’ banks. I think this is the only way we can get back to a healthy private capital system; incidentally, I think such a solution (getting to a point where a couple of banks fail and we’re still ok) would actually restore a lot of confidence to the system.
C Dan
February 2, 2009 at 1:03 pm
Today’s news about Allstate’s downgrade leads me to believe that the nationalization might also include insurance companies (not just banks). If not, we will surely see individual states taking over their respective insurance markets.
(See the pending withdrawal of State Farm from the Florida market, and assumption of those policies by the state-run Citizens Property http://www.cfnews13.com/News/Local/2009/1/28/state_farm_pulls_out_of_florida_housing_market.html )
Any Comment?
engineer27
February 2, 2009 at 1:04 pm
Simon,
It was a pleasure to be a part of the live blog today — I was once an economics major, and have read some since, but until this all hit, I was not all that involved. I’m starting to get my sea-legs.
I agree with C Dan, it would be interesting to hear how we can break up these banks, clear the books (without creating a “bad bank” that will simply cost US taxpayers).
Renee
February 2, 2009 at 8:42 pm
Simon,
Thank you for your terrific work. I truly appreciate the chance to gain insight from such a brilliant thinker FOR FREE over the web!
I have a question. Recently, there has been talk of penalizing the bondholders of banks that are aided via the upcoming “multi-pronged bank plan” (instead of just penalizing the common stockholders and preferred stockholders). How likely do you view this as occuring? Wouldn’t this effectively crowd-out private capital, and increase the probabilities of a very bad outcome?
Thank you for your time!
Matthew
February 3, 2009 at 12:34 pm
Proff. Johnson.
In my humble opinion there already exists a model for fixing this bank mess. In Sept. Washington Mutual Bank was taken over by the FDIC. However , WM was a bank holding company, and WM FSB was a just a holding of WM. Therefore, why cant the goverment do the same thing it did with WAMU wtih CITI of B of A. Their corporate stuctures are quite similar , and by removing the banks from the holding company and leaving the toxic assets with the holding companies, they Gov would kill two birds with one stone. It would take over the banks and recapitalise them , and as such could lend at its will, and it would also support the idea of the free market since by removing the banks from the holding companies stock holders and bond holders would reap the consiquences for these toxic assets. Just my two cents. As it is likely that these banks are already insovlvent , I believe the the GOV has the power to do this. This would also support a recover since the gov could then break up the banks and sell them off to private capital groups or anyone else.
Ernesto
February 3, 2009 at 7:11 pm