Nationalization Works

By James Kwak

The Treasury Department today announced that it has sold off the rest of its stake in A.I.G. Treasury will focus on the claim that taxpayers made a profit on the deal. As I’ve written before, the story is a bit more complicated.

But that’s a sideshow. The point of nationalizing A.I.G. (what else do you call it when the government buys 80% of a company?) wasn’t to make money; it was supposedly to save the global economy. In any case, things have worked out pretty well: the global economy is intact, though still not healthy, and A.I.G. is a private company again.

Which brings up what, to me, is the bigger question: Why were we so afraid of nationalizing Citigroup and Bank of America four years ago? And isn’t A.I.G. looking like a better company today than those two?

77 responses to “Nationalization Works

  1. Adoption and marriage are different. While the former is a symbol of magnanimity, the later displays a selfish motive which, in economics, could be destructive in the long run.

  2. Rajendran K.R – nice attempt at sounding intelligent. Please explain how merely displaying a “selfish motive” can be destructive? Are you just stringing words together to sound important?

  3. Citibank and BofA could have been resolved under the FDIC bridge bank authority that they have possessed since 1987, but the chicken little crowd would not let that happen. As for AIG, it is not at all clear that the financial world as we know it would have come to an end if AIG was allowed to fail, yet the Fed and FRBNY are still not willing to release details of their analysis of same four years after the fact and still has an army of Fed and Justice Department lawyers to fight under FOIA exemptions any efforts to reveal the analysis:

  4. Been wondering the same thing, but curious about net costs: how much did the UST guarantee when we nationalized AIG? (And we backed their obligations completely, right?) Would this have worked out any differently had the US govt backed only 80% of AIG’s obligations? (i.e., everybody takes a haircut) 70%? 50%? And I’m assuming EVERYBODY with a stake in AIG (equity & bondholders) was wiped out — is that in fact the case?

  5. Hey, come on over to my house, and sometimes we can go over to YOUR house?

  6. James,

    I’m a huge fan of your blog in general. But think you’ve missed the point here. The government bailed out (took over, whatever) GM, Chrysler, and AIG because they would definitely have gone bankrupt and that was a worse alternative for the country than nationalizing them – thus preserving the capital system (in the case of AIG) and most of our car manufacturing industry (in the GM/Chrysler case). The government did not do it to make a profit (though it is nice that they did – though I think these calculations seriously undervalue the cost of funds).

    If you believe that letting AIG go bankrupt would not have been a danger to our entire financial system, then make that argument.

    I also take great comfort from the fact that the management of AIG, GM, and Chrysler were shown the door. Perhaps the best argument for nationalizing other banks.

  7. Well hell, why bother privatizing it again?

    Furthermore, we should never have done this at all because they will continue to make decisions based upon the knowledge that someone will catch them when they fall.

    I think there is something called creative destruction that is somewhat tied to opportunity for those who can do it better.The current system explicitly prevents these (some folks say healthy) functions from happening. Don’t liberals believe in Darwin’s survival of the fittest over creationism?

    The saved-by-the-govt game keeps the same morons in their same positions, both in the govt and in the private sector, to the detriment, not only of those that pay the bill, but to those who would benefit from the opportunity to do better when a company fails.

  8. So now we know how to handle our next “Minsky moment” – nationalization?

    Mr Kwak, I look forward to your follow-up.

  9. The reason why it was a bad idea to nationalize AIG and CitiBank is they will do it again once they pass the stress test.
    If some of the CEOs had got jail time or at least an opportunity to stand up in front of the shareholders and depositors and say “I’m sorry I lost your money, we are filing for bankruptcy” then we could probably look to better behaviour from the other Bank CEOs in future.
    But since there is no implication for taking excessive risks they will keep doing so in hopes of bigger and bigger bonuses.

  10. Webster’s definition of nationalization: To remove from private ownership and place under governemt control. AIG was not nationalized. It’s interesting though, Kwak is using the same misleading interpetation of nationalization as Rush Limbaugh, Glenn Beck, and FOX News pundits. They squealed like stuck pigs about Obama “nationalizing” the banks, GM, AIG, etc., when in reality, the only thing nationalized were the losses.

    Bailed out organizations receive 0% money from the Fed, whose loose monetary policy is driving up the cost of food and fuel. AIG, GM and banks paid back the gov’t with gov’t dollars, and the Fed’s excise tax on the middle class. Also, Congress pressured FASB to relax mark to market rules put in place after Enron’s collapse. So bailed out institutions are able to determine asset values on their balance sheets with “creative accounting” techniques similar to Enron.

    The opaque nature of the CDS market is antithetical to efficient markets. This dark market, with respect to counterparty obligations, illustrates the inherent flaw that produces gross mispricing of risk. Not to mention the prevelance of naked CDS’s where no one owned the underlying. AIG is another speculative bubble waiting to burst and it should’ve been allowed to fail along with the entire CDS market. The Fed’s QE to infinity correlates with AIG’s moral hazard to infinity. Here’s a 90 second clip of Michael Greenberger on naked CDS’s.

    Saudi Arabia and Venezuela have nationalized oil industries. The gov’t owns all the assets, management are gov’t employees and all profits go to the gov’t. What Kwak endorses is a crony crapitalist version of nationalization that could’ve come out of the mouth of Jamie Dimon, or Rush Limbaugh. Oops! Apparently, Kwak is not concerned about his credibility. For a more honest assesment of AIG and Too Big To Fail, listen to KC Fed President Tom Hoenig (first link). Followed by Senator Brown citing a CBO report saying it will cost taxpayers 8.6 TRILLION to prop up failing banks.

  11. When I first started reading this blog, James was on fire. Recently it seems his posts have lost a lot of their impact. It is mostly for the comments that I read this blog now. It seems lately that these are much more informative than the posts themselves. I would like to express my thanks to the educated people that take the time to write insightful comments. Thanks.
    As for you James, please pull yourself together! I know the old mr Kwak is still in there somewhere.


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    Asian Gifts

  13. I’ve made better trading and investment decisions that in my entire 15 years doing this observing this “Forex Kong Guy” at

    The market calls and his take on global markets is absolutely uncanny / sickly accurate.

  14. The reason it was correct to be afraid of nationalizing those companies (and setting greater precedent) was very simple: the government is not suited to run anything efficiently for any extended period of time (e.g., SS, Medicare, USPS, etc.). Absent the fear, nationalization would run rampant and creative much uncreative destruction. Making decisions from high above (i.e., government bureaucracy) inevitably leads to poor performance and poor results for people on the ground.

  15. “Treasury will focus on the claim that taxpayers made a profit on the deal. As I’ve written before, the story is a bit more complicated.”

    This is why we have capitalism. The political process is not capable of judging these actions properly. Though I tend to agree with James’s idea of nationalizing banks as well in the final analysis, any nationalization (or quasi-nationalization) must be a last resort.

    “We made a profit” is no more than a political selling point. We used public credibility and resources for the benefit of AIG employees and counterparties. If this was such a good idea purely because of the “profit”, the government should bail out all businesses in liquidity crises and would profit statistically. It’s really all about the systemic risk.

    The next phase must be to disentangle the actions of banker-gamblers from systemic health. Since that too is a political process, I can’t hold out too much hope either.

  16. Its so funny dat peepl tink we have the capitalisim wid uncle sugar nationalizing companies and da fed buying billion$ of bonds each month, tee hee

  17. @GG – taking a higher-education, *engineering* institution like M.I.T. and setting the intellectual prowess of the *greatest minds in the world* to the PERFECTION of greed was not the greatest idea to come out of the USA.

    Let’s face it, this collective and TeaM attempt at the perfection of “greed is good” ran into the same mathematical constant that stalks all other attempts made by imperfect attempts at perfection – what i call “The DUH! Constant”.

    But since humanity in every epoch since the beginning of time has so much personal experience with this “Constant”, we soldier on rather elegantly when we don’t let foaming-mouth absolutism run amok. We grant mercy freely once the admission is made – “…we don’t know WTF we are doing…”.

    So we get back to the checklist – don’t want to neglect the maintenance of the *stuff* that has proven to work, even perfectly as in the case of the humble seed :-).

    To ignore the damage already caused by the experiment because they haven’t given up on perfecting greed is NOT ACCEPTABLE.

    If they persist, it’s at their own peril since there will never be a time or place when laundering drug lord money via a fraudclosure scheme will be an *acceptable* evil in the quest for the *perfection*.of GREED. Ditto for the insane investment into the spy apparatus that also threw people out on the street so that they could use people’s personal property as collateral to build those *offices*!

    The correction must be as *radical* as the search was – equal and opposite reaction, if you will. Those boxes of cash will now go from drug lord depositor to bank teller to the accounts of the mortgage holders who also happen to be people who ARE NOT CRIMINALS, have normal minds, and labor “for the greater good” – the enemies of the mutants.

    Time to re-balance the “power” and land ownership is THE way to do it. NO ONE is going to get away with this beyond-tragic and delusional insanity that living in the psycho world of perfecting greed wrought. it is going to get to blood shed – the final RIGHT left to people to protect themselves from PREDATORS.

    So think Homestead Act and the tax reform know as income averaging under Prez Carter, the nuclear scientist and peanut farmer…the last REAL “of the people” representative.

    It’s THEIR “End TIme” – and they even picked the date themselves :-))

    “….yup, you don’t know WTF you are doing – hey, join the club….so let’s figure it out without all the MEDIA crap….”

  18. Kwak asks: “Why were we so afraid of nationalizing Citigroup and Bank of America four years ago?” Unfortunately, this is the kind of crony crapitalist propaganda one hears on CNBC’s “Skwak on the Street” and “Skwak Box”.

    Putting aside Kwak’s feeble attempt to redefine nationalization as privatizing profits and socializing losses, here’s a few reminders why bailing out Wall Street was…..criminal.

    First, according to Neil Barofsky and William Black, the financial crisis was caused by Wall Street fraud. I’ve posted the following links numerous times in response to Kwak’s previous posts, but given his disregard for the rule of law and ongoing attempt to rewrite history, restating the facts is necessary in order to establish a factual baseline.

    Second, bailing out criminal individuals and entities has been catastrophic for the Federal budget and national debt. If fiscal and monetary policy had been focused on limiting home foreclosures and stimulating the main street economy, consumer demand and economic growth would be reducing the Federal deficit. In the following clips, Simon Johnson says TRILLION dollar deficits are due to lost revenue resulting from the financial crisis and recession.

    Instead of letting markets clear the Wall Street refuse, Congress chose to prop up Citibank, Bank of America, and by extension Countrywide. Kwak’s crony crapitalist version of nationalization works great, for organized crime. Here’s a couple examples relating to Citi and BoA.

    The reality is, Kwak is a criminal co-conspirator.

    Check out this post titled “The Fiscal Cliff”

  19. “…he global economy is intact, but still not healthy….”

    This might appear off topic and certainly has not been mentioned, yet:
    But, if the World Bank is correct—-if nations do what they have commited to do with regard to carbon reductions, a 4 degree C average global temperature increase over pre-industrial average temperature will be reached in 2100 and, if they don’t do what they have committed to do, the 4 degree C increase will be reached in 2060.

    4 degrees is a global disaster. The global economy is not responding to its needs. Sarah Pallin may as well be President. Drill Baby Drill. The Mayan countdown is off by some decades, but the countdown is starting now.

  20. Paul P, for a perspective different from U.N. and World Bank propaganda, check out this website on climate change.

  21. Why can’t the FED be nationalized? This would end the usurious debt-based monetary system and make our nation and our people so much more prosperous. If the banking families owning the FED object or threaten the government, arrest them with special forces and operatives, and make room at GITMO for their indefinite detention.

    When dollars are taxed via interest, there is never any getting out of the hole, absent the complete abolition of this system, a radical approach to a festering problem. You’d see fewer armed conflicts, also, as a by-product.

  22. I basically agree with Mr. Kwak’s thoughts in the short post up top. It says something that very much needs to be said, and is often not said after the smoke has cleared (if you consider the current time such time as “smoke has cleared”).
    I don’t think Kwak is necessarily always that insightful (although he has his moments). But what Teacher Kwak is exceptional at is touching on some important point which had been argued in the not too distant past that 98% of the great unwashed had forgotten had been verified or nullified through the passage of events (the fact that “nationalization” of AIG, as Teacher Kwak put it, worked out pretty well compared to the way CitiGroup was handled).

    This is one of the reasons BaselineScenario is a beautiful blog that adds to the dialogue, Mr. Kwak is always going back to check if the ash embers have been properly extinguished. That is to say by the time we see the proof in the pudding, often times others have moved on to other issues when the issue has finally been made clear.

    Here is my one vexation or needle in my b*tt from Kwak’s comments: I believe the more appropriate terminology or nomenclature would NOT be “nationalization” but instead is more accurately called RESOLUTION. You can argue that is semantics, but I don’t think so. Nationalization is a word which implies it was instigated or initiated by the government, when in fact is was the excessive and irresponsible risk taking by TBTF banks with depositors’ and taxpayers’ money which had forced the government’s hand (which the FDIC could have used had Henry Paulson not been such a dickwad, oil massaging the hiney of his CitiGroup cronies) to use the RESOLUTION authority.

  23. I should add, the appropriate name for that CNBC show, since most of the losers who watch it are watching it to get erections from ogling the female anchors and not from procuring ANYTHING useful from what they say, as it is 95% worthless, should be “Skank Box”.

    OK, so let’s start the new trend. CNBC shall from here on be referred to as “Skank Box”. Join the new slang trend, join the new slang movement. We will conquer the world, we will conquer the vernacular: CNBC = “Skankbox”. Thank you for your support. 1800 CNBC = “Skankbox” Thank you.

  24. Oh Well, at least we have Republican Senators who care for the health of Americans everywhere:

  25. Yes, here is the “point man” for the Republicans in the current debates. Hey Senator Boehner, don’t step out of the car, you might hurt passersby. Just try to articulate the word “functional” 3 times consecutive without crying:

  26. Maybe President Obama can attach something to the budget bill which restricts internet freedom for Mr. Boehner’s benefit. Senator Boehner might trade raised revenues from the top 2% to get articles like this one removed from the internet:

    Heck, if I saw articles posted online about my “legislating” and ” ‘battles’ for the American people” I MIGHT ceaselessly sob myself silly across the nation’s capital. Maybe….. but I certainly wouldn’t be lecturing others while simultaneously acting like a degenerate.

  27. *should have typed “Capitol” in my above comment, not capital, in last paragraph. Anyway…. the person that was mainly directed at probably won’t read it until….. nevermind.

  28. @Bond – every penny that is *cut* from *entitlement* programs in this latest *deal with the devils* will go directly to the pockets of the TRILLIONAIRES via crap schemes like AIG.

    Look at the HSBC story – the EXCUSE is that the world economy would collapse if they did not LAUNDER the drug $$$ via fraudclosures

    but the world economy is JUST FINE and not in danger of collapse if the middle class of USA is wiped out???!!!!

    This IS serious.


  29. @ Annie, re: HSBC….as noted, I’ve been maintaining the FINES $$$ are viewed as a minor cost of doing business, a remote possibility, at best. When you’ve laundered literally hundreds of billions $$$ of FILTHY (literally) drug money, what’s a $1.9 billion slap on the wrist sanction?

    This IS serious, we agree.

    To end the scourge, start prosecuting. The United States employs a vast array of highly competent US Attorneys, and I’d bet you that these men and women could put these jokers away for a good long time. Start as high up on the food chain as is practicable and in keeping with securing an actual conviction,

    Merry Christmas and Happy New Year, Annie.
    Same to Messrs. Kwak and Johnson.


  30. It was the end of their economy, if they didn’t act, so they did. They truly believed it, and so it was done, on behalf of all the branches of gvt. 4 or 5 depending on the expense of your accountants and councilors.

  31. Steering towards GM and away from AIG, but still along the lines of govt intrusion, Y’all do understand that bond certain bondholders will no longer hold bonds for corporations with unionized help b/c we put the unions ahead of bond holders, right? and so corporations must pay higher interest…….costs get passed onto consumers, certain corporations actually never get formed……….prices go up and everyones standard of living goes down a little bit each time something like this happens.

    Do you understand death by duck bites? From the progressives, Its always, “oh,just pay a little more, whats the big deal, you’ve got the money? when talking to libertarians but “oh, gosh, we need to give that poor person $100 more this year, every dime makes a difference.” Seems as though not all are created equal. some were created to get, others to give, .

    Too much intrusion from the top always results in unintended consequences of which this website glosses over way to often…..because, hey, they are tough to discover.

  32. Insiders knew the subprime bubble was going to burst. May 16, 2011 Simon Johnson gave a speech at UC Santa Barbara. He said the CEO’s of the six largest US banks drew “2.6 Billion in cash” out of their banks “before” the 2008 collapse. I think Rep. Marcy Kaptur summed it up best in this two minute speech on the floor of the House.

    Not only is Kwak is trying to absolve Wall Street criminals of all their crimes, he’s trying to argue that 11 TRILLION of lost household wealth and retirement funds is a good thing. It’s a good thing because it “works” for AIG and banks who use the dark CDS market to extort concessions from sovereign nations.

  33. It’s a rhetorical question right Mr Kwak – because we all know the answer is rooted in the dastardly purchasing and owning of the socalled government who bailedout the very predatorclass oligarchs responsible for the most severe economic crisis since the Great Depression. This den of vipers and thrives bruted and pimped the fiction (dutifully repeated incessantly by the complicit parrots in the socalled MSM) that if the finance oligarch were not bailedout ($17 trilliion and growing) – the world would come to an end. This fiction and naked lie was bruted and pimped by the predatorclass and their spaniels in the socalled government to enrich and shield the predatorclass and predatorclass oligarchs and heap all the burdens and horrific costs on the people.

    A resolutiontrustlike entity could and should have been established that would and could have nationalized the TBTF oligarchs, eliminated, and prosecuted the TBTF oligarchs leadership, recognized the catastrophic losses and epic failures, and over time righted the horrible wrongs of the TBTF oligarchs criminal Ponzi operations, and their failed models and failed management – with significantly less pain and hardship to the nation and the people.

    Iceland is the best example. Oligarchs were nationalized, the criminals heading the oligarchs were prosecuted and sent to jail for their wanton criminal behavior and grotesque mismanagement, the people (not the predatorclass oligarchs) were bailed out – and Iceland is enjoying a real fundamentally measurable recovery.

    Failed institutions and Failed managements bruting and pimping Failed models need and must be punished and eliminated, – NOT shielded and rewarded for grotesque FAILURE and wanton criminal abuse.

    Amerika’s purchased spaniels in the socalled government chose to bailout predatorclass criminals and Failures and heap all the terrible costs and burdens on the people.

    Shame! Shame! Shame!

  34. @GG, “…..Not only is Kwak is trying to absolve Wall Street criminals of all their crimes, he’s trying to argue that 11 TRILLION of lost household wealth and retirement funds is a good thing…..”

    Like you said, THAT was the “good thing”, but if HSBC and Wells Fargo and other banks stopped laundering drug cartel cash (the only cash that seems to have been transformed into debt free FIAT $$$, and subject to 0% taxation), then THAT was the “bad thing” because it would have – pump up the hysterical note in the talking head giving this explanation)

    “brought down the bank”….

    11 Trillion of lost MIDDLE CLASS household wealth = Good thing for bank

    Stop laundering drug cartel cash = BAD thing for bank

    As everyone AGREES, you can’t do “BAD THINGS” for the bank…

    @Bond – and a happy Saturnalia to you and yours! I keep the original reason for all the merriment around the Winter Solstice alive in memory since it showed some practical and logical thinking back among our superstitious ancestry – a way of thinking that eventually led to the discovery that we travel around the Sun, and not vice-versa :-))

    So Party on with so much fun that the Sun gets jealous and comes back to join the partiers:

    Jesus just got tangled up in the mix after he died…his birthday was August 21.

  35. Ahh yes, the Urantia version of Jesus’s death, but nothing of his return!

    until now of course.

  36. Lot of emotion here, but no facts. Here are two facts that explain everything you have all been hollering about.
    1) GM (and Chrysler) have a market share of less than 20% so all this clap trap about bailing out the auto industry is just that. 80% of the auto industry is not in Michigan, and they build good cars Americans want to buy, pay good wages and have good benefits, and the jobs are NOT going overseas. So let’s stop this “ah gee we bailed out the auto industry crap.”
    2) The reason we bailed out AIG is that they held a staggering amount of Goldman Sachs paper and Timmy (then president of the NY FED) demanded that AIG pay 100 cents on the dollar to Goldman Sachs. No haircut for the Secretary of the Treasury’s buddies. Get real folks. All we did was cover Goldman Sachs butt. But all the rest of us got to take a haircut!!

  37. Nexr time you use your billions to buy a role for yourself in a music video on youtube, filth, you might want to put on a clean pair of underwear and comb your hair.

    According to the Mayan calendar, it’s even a different date for JC’s B-Day – go figure.

  38. GG said, in part, “…11 TRILLION of lost household wealth and retirement funds is a good thing…..”

    Saying it “without emotion”, James…? “No haircut for the Secretary of the Treasury’s buddies. Get real folks. All we did was cover Goldman Sachs butt. But all the rest of us got to take a haircut!!”

    Ah, FIAT $$$$ distributed through fractional reserve banking, what could go wrong there?

  39. Did you see me in that video? No! And I don’t even wear underwear, or have hair, you with the fat fannie.

  40. Here fannie, this is me in this video!

  41. A conversation about Judas – Page 1941 – “…Warning, even when administered in the most tactful manner and conveyed in the most kindly spirit, AS A RULE, only INTENSIFIES HATRED and fires the evil determination to carry out to the full one’s own selfish projects, when love is really dead….”

    It’s not hard to pick out who has only love-of-money in their hearts…and how that *love* stops their heart from beating in sync with their own species…

    AS A RULE, once a person like you, filth, perceives goodness in another (whether it is even there or not in that other person doesn’t matter because the psychos’s world is all about ME ME ME)

    all it does is INTENSIFIES HATRED in you towards me, in this case….

    All that psycho babble in your own greedy head that guides how many “financial” bullets you pack for the day when you wake up is a problem I know is coming – and that’s what this is all about. Being ready for it and having a counter-plan….FREEDOM is for everyone, no?

    BTW – I come from the “no butt” gene pool – the horse butt look – all muscle and bone…and great legs….but I doubt you’ve ever come across the type in USA….no one on the maternal side of my gene pool – stretching back generations – ever willingly took up the offer to come to USA to seek their *fortune* – they knew what got here first….

  42. Words can still be met with music!


  43. No one shares your life experiences, filth. It’s too 1%…and that gene pool doesn’t produce great artist, scientists or musicians – hence the common understanding which is bottom-lines as the “rich man’s idiot son”…

  44. I agree with your opening sentence, quite the contrary with the latter part though. I am no senators son, but I am the first one to obtain a college degree in my family’s history. And then use my education to hold the upper class hostage to proper morals and common sense. It’s so, sixth sensed. That must where I shook off your mind.

  45. That’s the typically intolerable arrogance unique to USA – the hypocrisy. They have no morals or common sense and the voices in their head make them believe that they are even more special instead of just freekin’ nutz – like all god has to say to anyone as morally special as you is how to suck it all up from HONEST LABOR so that 480 people are worth 2.08 TRILLION.

    And it’s GOOD for the bank to launder drug cartel $$$$, but BAD for the bank if all Americans did not *lose* TRILLIONS and now you cretins are after the SS fund – you deserve to DIE for that much thieving and IMMORALITY kissing drug lords asses…

    That is the part that is reigning hate down on you fools. Everyone knows you are nothing but cold blooded killers and thieves, yet you begin your ruthless pre-emptive *negotiations* from a stance of MORAL SUPERIORITY. You’re lucky the head didn’t get loped off when the first word came out of your mouth. But alas, misogynistic countries have all found the MORAL common ground which makes they all bros, no?

    I’m already immortal. You, filth, are the walking dead – you PROVED what is true by starting in on me way back – perfect internet drama and YOU are the “evil” one through and through:

    “…Warning, even when administered in the most tactful manner and conveyed in the most kindly spirit, AS A RULE, only INTENSIFIES HATRED and fires the evil determination to carry out to the full one’s own selfish projects, when love is really dead….”

    you might as well seek shelter in the arms of the frothy apologists who are selling “autism” as the superior mutant strain….


    You want to spit bullets when you have to keep listening to this PARTICULAR type of bs – the taxes were DESIGNED, since 1980s and in overdrive in 1990s after Glass Steagall was thrown out, to keep the poor, poor, through TAXES!


  47. @Bond Man – the patriotism is not country specific, especially when the country doesn’t hold the same culture or values in common – EXPERIENTIALLY-earned culture, I might add. Obviously, not all “white men” are the same as everyone else should have gleaned through the history of the “ism” insanity of the 20th century. But then, no one else is any better – tribalism persists in Africa and South America, religious differences among the Islam sects, and China, Japan, and India aren’t all on the same page, either.

    A common denominator of perfecting greed through math won’t last long as a means for survival of the fittest – the greediest person is not a caretaker of the earth. Hoping Jesus comes back for capture and blood sacrifice for your sins ain’t gonna happen, either.

    And “once the love is gone” – being nice only fuels the hatred….the paradox to contend with as far as justice and rule of law is concerned.

  48. Wanna know why I don’t pay for cable TV??? Because I’m not gonna PAY to have a large pack of LIARS mislead, misrepresent, and “talk their book” to me. Gary Kaminsky and Jim Cramer can fool some of the people all of the time, but eventually those who commit those lies intentionally, on a daily basis, without regret, eventually rot in hell. Frankly, I’m just sorry I can’t watch from the bleachers when they do rot in hell.

  49. I keep an eye them cause they are at least the most mature folks on cable/satellite. They are pitiful lot no doubt, and will end up in the scrap heap of time along with so many others who deserve it. I hate the way the cable co.s operate, and the cost per reasonable watchable stations their packages offer. It’s a rip off like so many other professions, but right now we have no other choice. I group them with contractors and a catchy phrase like, “What is the difference between a contractor and a thief? Thief work at night.”
    I pay the cable co. more money than I pay the electrical co. It’s a cryin shame.

  50. Great comment James, but the question isn’t why were we scared to nationalize Citibank. The question should be why was Hank Paulson afraid to nationalize Lehman Brothers?

  51. Wow, did anyone see CBS depiction of Robert Bork tonight on CBS Evening News?!?!?! Now I am definitely not a Robert Bork fan. I put him right up there with Clarence Thomas as far as classlessness and a vision of America which could only be constructed by birth with a silver spoon up his A$$. But Wow, I mean even I have to say for a man who just died that was a pretty vicious depiction. Not saying it wasn’t accurate, but I think if I was Scott Pelley I’d just mention that the _____ died and then come back to the issue after a couple months.

    I’m not one who normally believes in pulling punches but, WOW, what if his family happened to have the TV on???

  52. @JDF

    >The reason it was correct to be afraid of nationalizing those companies >(and setting greater precedent) was very simple: the government is not >suited to run anything efficiently for any extended period of time (e.g., >SS, Medicare, USPS, etc.).

    First of all, AIG and the banks were the ones that blew the lid off incompetence by taking too much risk and having wrong kind of incentives and plainly robbing their clients. So, because we have let private business dictate their rules and abolish their regulations, we have a situation, where were supposed to bail out private companies. Deregulation has been an abysmal failure in the financial sector.

    Second, if you wanted to bring up examples of how government can do some things very well, you couldn’t have picked better examples. 1) Social Security is over 75-years-old and is fully funded and solvent for the next 25 years. Even after that, it will be able to pay out benefits at 75 per cent rate basically indefinitely. All you need to do to fix it, is to raise the cap on payroll tax and the system will keep the US elderly out of poverty and e.g. help those, whose mother or father (like Paul Ryan’s) pass away too early. 2) Medicare is actually more efficient than it’s private sector siblings. Look into it. The main reason it is getting more expensive is that the cost of medicine, etc. has gotten inordinately more expensive. That’s because politician in their infinite wisdom are easily bought nowadays. They’ve made a deal with big pharma that government cannot use its considerable leverage to negotiate drug prices, etc.

    >Absent the fear, nationalization would run rampant and creative much >uncreative destruction.

    But we had to basically nationalize them anyway! The difference is, that this way, we ponied up the money, but got basically nothing in return.

    >Making decisions from high above (i.e., government bureaucracy) >inevitably leads to poor performance and poor results for people on the >ground.

    That’s an ideologically obtuse blanket statement.

  53. Three Cheers For Lusmu. He/she got it exactly right. We have two huge problems facing the government (and to paraphrase Pogo, we have met the government and he is us). They are loosely bunched together and called “entitlements”. One is easily fixed and the other is incredibly difficult to fix, but it is on track to bankrupt the country.

    Social security is the easy one. Lift the cap and it is solvent for the lifetime of your children and your grandchildren. Period, end of that story. No arguments, no blather, just do the simple calculations.

    Healthcare costs, however, present a very different problem. We spend about twice as much per person as any other developed country, but we get measurably poorer results. Swedes live longer than we do and our infant mortality rates are right up there with third world countries.

    Here is what we spend our money on.

    1) There are five sound research studies, among a huge amount of garbage passing as research, that all used different time lines and different specifications, but they can all be summed up as 50%-60% of all healthcare expenditures occur in the last two years, two months, two week of life. This is a fact. We have enormous skills in prolonging life, but everyone of them is hugely expensive. The Wicked Witch of the North ran around screaming death panels, but the real death panels are nameless clerks in insurance company offices who approve, or not approve, specific treatments.

    2) Chronic diseases come second and account for about 20% of our healthcare costs. This is mostly is diabetes that stems directly from being over weight. At least end of life costs come to an end, but diabetes goes on for a lifetime, and the number of our children who are obese and overweight is stunning.

    3) There is no way to put an exact number on this problem, but it involves our lack of knowledge of the effectiveness of various drugs with particular problems, the effectiveness of various treatment protocols, surgeries, etc. Here is an example; exactly the same procedure costs $100,000 at the Mayo Clinic in Rochester, Minnesota and $200,000 at the UCLA Medical Center in Los Angeles. Both are first rate facilities. We can address this problem with digitizing all our medical records (as they do in France and many other countries). Then we could know which healthcare activities are most cost effective.

    4) Nobody knows exactly how much fraud contributes to our healthcare costs, but it seems to be substantial because it has almost become a regular feature in Business Week. If we assigned more investigators to medical fraud and fewer to airport security, I have no doubt we would all be a lot better off.

  54. James, I am amused by your benign view of “nationalized” financial institutions/sectors. Obviously, you have not had to live/work in such environments. I would encourage you to look at some of the IMF and World Bank research on such policies. Where do you dig up these weird ideas?

  55. Putting James’s unsystainable health care issues aside. Here’s to a Merry Christmas and/or Happy Holidays to the readers of The Base.
    Brand new line up this year, it’s the Tom, Chuck, and Harry show, and I now know why I couldn’t find the Letterman version of Harry’s song. And good riddance to the dysfunctional congress and the games they play! Cause it’s show time, and show time is no time, for changing your mind.

  56. @Del You should look into the Swedish model. The Swedes basically nationalized the financial companies that needed to be rescued in their “Savings and Loans” disaster in the early 1990’s. Later, they sold those companies back to the private sector making a most of their money back. The results were less harmful on the tax payer and stabilized the financial markets more quickly.

    It wasn’t perfect, but worked much better than the model being used by politician today.

  57. Lusmu… Woulda, shoulda, coulda. It is very important to try to learn from the experiences of others. The US also had its S&L crisis back in to late 80s, and turned to the Resolution Trist Corporation to dig out the sector. Unfortunately, Hank Paulsen did not leave an instruction book behind for tax Cheat Tim Geithner on what to do with the TARP. (“TARP for Dummies.”) As a result most of the money was lent to the banks (and a lot has been repaid), in the process increasing the concentration of the banking/financial sector and the risk of TBTF.
    It may be that the Swedish Banks recovered and are now healthy — having also fended of the siren call of the Euro and shying away from the debt of the “Euromediterranean” . Congratulations to the regulators! (I recall that we used to have excellent Swedish economists — and even — an MD from Sweden at the Fund. They’re no slouches!”)
    However, I have more familiarity from the state-dominated financial sectors in the Middle East, Africa, South Asia and Latin America, where every few years the same zombie state-owned (often sector-specific) bank would reappear with a different name and a recapitalized balanced sheet. Something about the Swedish discipline that didn’t seem to travel very well.

  58. Lusmu…The World Bank has very recently released a report looking back at the financial crisis, “Rethinking the Role of the State in Finance”. It can be read and downloaded at:,,contentMDK:23267383~pagePK:64168182~piPK:64168060~theSitePK:8816097,00.html
    Probably a bit more learned and comprehensive than Kwak’s “casual empiricism”.

  59. Yea, the momentum of that dry powder crowd just refuses to yield. Plenty o energy and hypocrisy, but beyond that they are a clueless lot of gluttony.


    Don’t want to haul off the psychos and throw them in a jail where they NEED to worry about whether the next guard on duty is going to just walk down the hall and shoot them in their cells just like the rest of USA citizens now have to worray about ALL aspects of their life since the *financial* bullets of fraud and corruption are also meant to destroy lives,

    then we go back to declaring ourselves ABOVE their *laws*…

    Not to worry, We The People aren’t *ism” lunatics, AND we have these RIGHTS:

    “….it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness….”.

    Gone for the break? Good, don’t come back.

  61. good golly miss molly,

    so after the loss of “…11 TRILLION of lost household wealth and retirement funds…..”

    what can be said about the CHARACTER of the current *negotiations* about TAXES and about WHO IS REPRESENTING the USA citizens – 50 million officially in poverty and we have to see the craven avarice of the 480 USA people worth 2.08 TRILLION evade all this horror:

    “….Putting aside Kwak’s feeble attempt to redefine nationalization as privatizing profits and socializing losses, here’s a few reminders why bailing out Wall Street was…..criminal.

    First, according to Neil Barofsky and William Black, the financial crisis was caused by Wall Street fraud. I’ve posted the following links numerous times in response to Kwak’s previous posts, but given his disregard for the rule of law and ongoing attempt to rewrite history, restating the facts is necessary in order to establish a factual baseline.

    Second, bailing out criminal individuals and entities has been catastrophic for the Federal budget and national debt. If fiscal and monetary policy had been focused on limiting home foreclosures and stimulating the main street economy, consumer demand and economic growth would be reducing the Federal deficit. In the following clips, Simon Johnson says TRILLION dollar deficits are due to lost revenue resulting from the financial crisis and recession.

    Instead of letting markets clear the Wall Street refuse, Congress chose to prop up Citibank, Bank of America, and by extension Countrywide. Kwak’s crony crapitalist version of nationalization works great, for organized crime.”

    JUST WAR!!!!

  62. One of the most powerful positions in Congress is Chairman of the House Financial Services Committee. Democrat Barney Frank held the position until Republicans took the majority in 2010. Republican Jeb Hensarling has recently been appointed to the position. In 2009, Jeb addressed the House saying deficits had risen 800% to 1.2 TRILLION and taxpayers were on the hook for 8 TRILLION as a result of the financial crisis. Unfortunately, Jeb (yes he’s from Texas) engaged in the childish finger pointing typical of bipartisan leaders, but it’s the underlying facts that are important. Just as important is the fact that childish finger pointing is a sophisticated bipartisan scheme to evade responsibility for their failures and crimes. Here’s the link to good ol boy Jeb.

    The evidence is incontrovertable, Kwak’s crony CRAPitalist version of nationalization, i.e., privatizing profits and socializing losses, has driven the economy and Federal budget over the cliff. The CBO says it will cost taxpayers 8.6 TRILLION to prop up the failing banking system.

    For the whole (non-partisan) fiscal cliff story:

  63. The House of Representatives needs a stronger hand, in order to be taken seriously. Without a proper balance sheet approach, they will continue to flounder in their own folly, and be the fools with no tools!

  64. TBTF is TBTS

  65. Moving on from the financial crisis, to the river crisis. The worst, (ice), is about to happen here folks.,0,1329083.story?track=rss
    Imagination, is the greatest nation of all.

  66. Bruce E. Woych

  67. Bruce E. Woych

  68. Interestingly, the people of the US, on both left and right, opposed the bailouts–and both were correct!

    People on the right wanted to just let the companies go bankrupt. People on the left either wanted to REALLY nationalize the companies (i.e. nationalize the profits instead of just the losses), or to let the companies go bankrupt and spend the money on bailing out ordinary homeowners who got screwed instead. All of these scenarios would have avoided the scenario we now have, where big companies can never fail because good ol’ Uncle Sam will just swallow their toxic assets to “save the global economy”, in the process making them even more able than they already were to get away with fraud.

    But that’s our “bipartisan” Congress for you–screwing the majority of US citizens from both ends.

  69. Well what part of swallowing toxic assets, and unsustainable health care costs, don’t Uncle Sam understand?
    And congress is nothing more than a trust of the people, and around here, if you trust too much, you don’t make to many birthdays.

  70. “When plunder becomes a way of life for a group of men,living together in society,they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.”Frederic Bastiat, (1801-1850)

  71. Tick tock, we watch the clock.

    Gonna get me a case of, full moonshine fever, tonighta!

  72. Well Sometimes you’re the windshield, and sometime you’re the bug.

  73. None of this evil happens in a vacuum. There is incentive and that incentive is not noble, or honorable. That incentive is wealth, impnderable, otherworldly wealth. With that level of wealth is purchased politicians, judges, law enforcement, governments! And in Amerika today – there are no laws or restrictions, or anything preventing the untoward and ruthless accumulation of wealth which has naturally shapeshifted and devolved into an organized crime cartel. And we’re not talking about ethical abuses or grotesque mismanagement, though those sins are prevelant – we are talking systemic endemic institutionalized criminal operations and a malicious ethos of sociopathic greed and an insatiable thirst for wealth and subsequent power and shielding, or insulance only wealth can purchase. It is the root of all evil, and in the end unsustainable economically, socially, morally, in terms of simple physics, and karmacally!!! There will be a balancing and a reckoning of the extreme imbalances that afflict Amerika today at the hands of the ruthless and lawless predatorclass. And….there will be blood.

    Never in the history of man have so few taken so much from so many, and all with the socalled governments sanction!

    There is no hope in hell for Amerika, until the predatorclass is put back in the keep!

    In a world where there are no laws, – there are no laws for anyone predatorclass biiiiaaatches!