Search All NYTimes.com
Friday, February 13, 2009

1.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 6:25 am
Link
Funny how the US and IMF urge "shock therapy" and radical steps when a developing country's banking system collapses. Yet now that so many of our banks have essentially collapsed (read: no more equity capital), we cannot bear to accept that the inevitability of nationalization. It is as if our own hubris keeps us from taking the very medicine we have prescribed to others for years.My father used to tell me that, when I was confronted by a difficult situation where I couldn't decide the best course of action, think what you would say to another person who is in your exact same shoes. It might behoove us to abandon our pride and ask what we would say to another country in our own economic shoes.
— F.G., New York, NY
Recommend Recommended by 415 Readers
53.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 8:04 am
Link
I used to work at a school where the prevailing thought was that the most important employees were the custodians, the support personel and the staff. Because without them then the boss wouldn't have a job.
— Bec, Morrisville NC
Recommend Recommended by 57 Readers
77.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 8:34 am
Link
Two points: First, even though the aggregate compensation numbers aren't massive, the very short term perspective that follows from having most of the exec team's compensation in stock or stock options probably contributed to this mess. It could probably be remedied by taxing stock option gains at a lower rate if the options are held for at least 5 years, or 3 years past the vesting datel, which ever is later.With respect to a bailout, I believe it is crazy for us to be bailing out banks (or any other organizations) without knowing exactly what's on their books. I work in the high tech industry, and no VC with more than half of their brain functioning would ever fund a company under the self-imposed restrictions the Treasury is putting on its own investments. The investments being proposed are for more money than the current market cap of the target banks! Anyone would expect board seats, voting shares, and the rights to examine and perform audits for that type of investment.These banks made some very bad bets, and with huge amounts of money. But there's no reason for us to cover those bets before restoring the banking industry, and *not* doing so would greatly reduce the cost of the bank bailout. I suspect that the financial industry is pushing for these bailouts so that someone will pay off these bad bets; we should not get fooled.If you let each bank do a controlled chapter 11 -- canceling any debts it owes, but then having the FDIC come in and guarantee any normal deposits on hand, and zeroing out the shareholders and the bondholders, you'd be able to recapitalize the bank for probably half the cost of this bailout plan up front. But the benefits are more than that, because as the sole capitalizer, the Feds would own all of the shares. They could give them away to people in the US, as you propose, or sell them directly and use the proceeds to reduce taxes. The point is that the recapitalized banks, without any toxic assets, would be something people would buy shares in again, once their balance sheets had a clean bill of health.The alternatives are ugly and won't work. The mortgage losses alone are probably close to 40% of $10T, or 4 trillion dollars. If the banks have half of that, that's 2 trillion dollars. And that ignores losses on securitized auto loans, commercial real estate, and synthetic CDOs based on these securities. This amount is simply too large to give away to the banking industry.
— PghMike, Pittsburgh
Recommend Recommended by 126 Readers
113.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 11:46 am
Link
"Mr. Obama then suggested that[nationalization] wouldn’t work in the United States, partly for cultural reasons." Who's culture is he talking about? Not mine, and my family has been here since 1620.He must mean the culture of the greedmeisters who have driven us into this ditch.
— Mary, New Hampshire
Recommend Recommended by 119 Readers
117.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 11:46 am
Link
How about adding the Chilean and South African models to the Swedish one--- let's have a financial equivalent of the Truth Commissions. Subpoena the most offending financial executives, force them to testify (even with a criminal immunity grant) and then force them to listen at close range to the stories of thousands who have lost their homes, their jobs, their health care, etc. That could keep the worst of the financiers occupied for months if not longer; they would have no opportunity to do us more harm and they might learn something. Make a long-playing reality TV show of the hearings on this depression and call it America Idle.
— William Espinosa, Charlottesville,VA
Recommend Recommended by 57 Readers
135.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 12:01 pm
Link
Why would the American public want stock in a bank with troubled assets? I'll take the stock of a high performer thank you very much. Who do I see to work that trade?
— George Damasevitz, Vestal, New York
Recommend Recommended by 13 Readers
137.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 12:02 pm
Link
"Nationalisation" of banks is a time-tested strategy in improving the economy of the country. India has immensely benefitted from nationalistion which helped micro, small& medium - sized companies build themselves, gave capital to a wide range of small-time entepreuners (essentially sef-employment of youth), more importantly accessibility to banks giving inexpensive loans to farmers. This revitalized the rural economy, the backbone of india then while also moderately improving the quality of life for the urban middle-class (cheap loans to buy electonic gadgets, upgrade housing conditions). However since "nationalisation" is essentially a socialist concept and came into force after india declared itself a "Sovereign Socialist Secular Democratic Republic", this concept might not appeal to the citizens of the U.S. The least the American government can do now is to tighten bank regulations through the Federal Reserve so as to prevent the banks from becoming "zombie banks" & also enforce a graded pay system for bank staff at the helm of affairs.
— swaminathan sendhil, chennai, india
Recommend Recommended by 44 Readers
144.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 12:18 pm
Link
I have heard few people comment on the real problem - we have allowed financial organizations to get so large that their failure would dramatically harm society. Why then do we not hear people talking about legislation that would limit the size of these institutions? Why don't we address the underlying problem instead of allowing for a likely rerun of this episode somewhere down the line?Doesn't a sensible solution include a breakdown of these large organizations - a forced divestiture?
— Guy Thompto, Cedarburg, WI
Recommend Recommended by 83 Readers
149.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 12:18 pm
Link
For cultural reasons Americans rather give away vast amounts of money as presents to the banks, than investing in them by buying shares?Wake up! You are being told that nationalization is a bad thing because the banks want the money without giving anything in return.
— Melanie Meyer, Berlin
Recommend Recommended by 139 Readers
188.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 12:46 pm
Link
I just don't get it. Why are Americans so afraid of nationalization and/or socialism even if solutions to our economic problems are hybrids, including elements of capitalism? It seems the majority of Americans would rather see the country go bankrupt before it would accept any form of nationalization, even temporary, of its industries. This irrational behavior is rooted in Republican held beliefs that the unregulated free market system is the only system that works in this country. Obviously, an unregulated free market system only works for a select few Americans...at the expense of all other Americans.
— Jeff, Chicago, IL
Recommend Recommended by 135 Readers
192.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 12:46 pm
Link
I agree with the previous comment that the only way to truly clean house is to nationalize the banks. Otherwise the US taxpayer will pay trillions and in the end the problem will not be resolved. The bottom line is America needs to get over it's "capitalism solves eveything" mentality and inject a little socialism into the system. Until the current system of rubber stamp Board of Directors and the perpetual pursuit of short term profit is smashed from the top down we will continue to end up in this position again and again as a society. America needs to develop a sensible, long term approach to it's industrial policy. Until we do that the "masters of the universe" will continue to enrich themselves at society's expense. They sucked the blood out of the economy and now we have a lifeless corpse. The way to get rid of vampires is to drive a stake through the heart.
— Andrew, Jersey City, NJ
Recommend Recommended by 81 Readers
208.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 12:56 pm
Link
It is long past time to nationalize the banking system. But rather than sell them all back, a cap should be placed on the size of banks with the Fed retaining control over the system as a whole.We might thus be able to return to a system of sound community banks that actually function as they should rather than serving as pawns for greedy inventment bankers onWall Street who could give a rip what happens in rural Oregon or anywhere else.Yes, let's begin with tar and feathers. Seizing some assets to feed the poor and throwing the investment bums out of the country wouldn't be a bad idea either!
— LH, Beaver, OR
Recommend Recommended by 51 Readers
215.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 12:56 pm
Link
It's nice to see the tough thinking of Mr. Krugman and the humane populism of Mr. Kristof coming together with a single conclusion: nationalize the banks, punish the bunglers. We will get there eventually, as political and professional America are dragged, kicking and screaming, towards the only rational solution. Of course all the neo-Hooverites will kick and scream the loudest. But they have been wrong about everything, for a generation now. Thanks to them, we have had three deregulatory ripoffs in less than 30 years: The S & Ls in the 1980's, the Banks in the 1990's and now the entire world financial system in the 2000's. You have to admit that when it comes to corrupt incompetence, America just gets better and better. It also shows that, politically, this democracy has a pretty flat learning curve. It is indeed way past time to take back our country.
— Eric Heath, Stanford University
Recommend Recommended by 121 Readers
221.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 12:56 pm
Link
The most discouraging dynamic of this economic crisis is caused by the perceived gutlessness of the American public. All policy and action, now, is predicated upon the belief that we're incapable of enduring hardship. This may be correct, but if so, no amount of stimulus or lifelines will save us from ourselves. While there's plenty of blame to be sprinkled about all segments of our society, the simple fact that great chunks of our middle-class, average folks deeply indebted themselves to live at the throne of materialism is seldom mentioned. Right up until the slump there was a jingle on TV by a national retailer for consumer electronics. It said, "I WANT ALL, AND I AND I WANT IT NOW!!" I use to CRINGE at the blatant hedonism of the ad....Not enough people felt the same way.
— Robert Arthur, Columbus, Oh
Recommend Recommended by 46 Readers
250.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 1:29 pm
Link
Yes, the time has come to challenge our conventional thinking about banks and banking. Why not take the idea of nationalization a step further.Let us create, alongside the Federal Reserve system with its regional organization, a new publicly chartered bank to be called the Federal Liquidity Corporation. It will be independent in political character and charged with the primary task of making direct loans to businesses and individuals, including those with mortgages to refinance.Second step: offer those private banks with the least exposure to toxic assets on its books, the opportunity to become a corresponding bank with the Federal Liquidity Corp. (FLC) on condition that it comply with the restrictions placed on the FLC itself, including caps on executive compensation, margins of investment return, transparency and oversight.Third, for those banks that do not want to become corresponding banks of FLC or that do not qualify for that status because of their overexposure to toxic assets, let them fail, subject always to protection of depositors under existing or expanded FDIC regulations.Finally, this plan would have a place for Tim Geitner: let him gracefully remove from the Treasury and head up the FLC or at least one of its regional offices such as New York.In sum. We'll have a light (and therefore perhaps a healthier mixture) version of nationalization but with an active competitor whose only shareholders are the US taxpayers.What about the long term: would we keep the FLC? Perhaps, but it could also 'wither away' in the face of greater success of the private market banks, if they should be that smart and effective.What do you think, Nicholas Kristoff et al?
— KP, Nashville
Recommend Recommended by 24 Readers
260.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 1:29 pm
Link
Having been a minority shareholder many times, I can attest that it is worth "a cup of warm spit" to borrow a phrase. America is healing, saving its money, buying prudently if at all, returning to massive skepticism about bright people amok with ideas fooling with their money. If we have a crisis of trust, we also have a crisis of faith, and people are praying, hard, at least in the little church I attend up here in Michigan. Since here, in Michigan, we have found it difficult to further inhure ourselves falling out of a basement window, in economic terms. I have a suggestion. It is based on years of experience.Stop, listen, think. I realize that Japan failed to act, and we are accelerating toward a stimulus package that will pour a goblet of water on a roaring forest fire. No matter what, banks will accumulate the capital we are now saving, lending will return, and when opportunity strikes, Americans will pursue it with zeal. We can send the bankers to Elba, send the CEO's to Barstow, and they will be replaced by bankers from Elba and CEO's from Barstow. Focusing on the stimulus package has been a fun diversion, but in the end we will do what we have always done, reach down, grab our bootstraps, and pull. And up we'll come. A hundred or so years ago most of us, in ancestral form, were gawking from a boat rail at a great mysterious land. It's still there. So are we. Breathe deeply. Have faith first, then trust. Give it a shot.
— northlander, michigan
Recommend Recommended by 13 Readers
263.
EDITORS' SELECTIONS (what's this?)
February 12, 2009 1:29 pm
Link
I agree the Swedish model won't work for cultural reasons. We have enough Joe the Plumber types, who despite their own pathetic financial conditions, will fight for the welfare of the rich.
— Poppy, Fremont
Recommend Recommended by 83 Readers
1 - 17 of 17
Back to Article »
Most E-Mailed
Laid-Off Foreigners Flee as Dubai Spirals Down
Really?: The Claim: Never Blow Your Nose When You Have a Cold
State of the Art: Twitter? It’s What You Make It
Bone Drugs May Help Fight Breast Cancer
Op-Ed Columnist: The Stump Theory
Post a Comment