In his impressive speech to Congress, President Obama again referred to the pitiful state of American banks. Already the US government has given hundreds of billions of dollars to major AmericaN banks. And there is billions more to come. ]
Which begs the question – why doesn,t Ob ama just nationalize the banks. I know people say governments cannot run things as w ell as the private sector. But surely government could not do worse than the private sector did with the banks.
Or at the very least what about a temporary nationalization.. Two heavy hitters — Alan Greenspan and Paul Krugman — have
both come out for temporary nationalization .
Or what would happen if Obama just let some of the big banks fail?
IncidentaLLy, why are Canadian banks so muchg more solid?
I’m still not clear on why the banks failed in the first place but I don’t think they are completely to blame.
As I understand it, the failure is the result of the banks holding too many “toxic” mortgages; that is, mortgages in which the borrowers are not able to pay their monthly obligations.
But did the banks properly and responsibly “hedge” their holdings of these mortgages by purchasing credit default swaps (CDS)? If they did then they had done the right thing by doing so. Unfortunately, the CDS’s were worthless because the companies that sold them (AIG amonst them) themselves didn’t have any assets to back them up when they became due.
If that’s how everything came down, how much of the eventual failure was the banks’ fault? Congress during the Clinton administration had deregulated the CDS market, requiring no oversight. And the SEC didn’t look at it too closely (just as they didn’t look at Madoff). And the reporting agencies didn’t notice anything either.
So I don’t know whether it was just the banks that mismanaged the mess. Certainly, Congress and the presidents — Clinton and Bush II — have to take blame.
I agree with Tony, and Canadian banks could have gone the same way if Paul Martin had not resisted the trend to deregulation and Harper not have the seats and time to proceed with it.
Tony is right byway of the CRA.
“Temporary nationalization?” You mean like, temporary income taxes? When will we learn? Leviathan doesn’t LEAVE YOUR HOME.
Krugman? Seriously, his theories are hopelessly dated and filled with clinkers. Spend, nationalize, attack tax cuts and spend more. We get it. Not impressive but we get it.
Insane spending spree will do squat. I can’t believe bailing out a-holes is a good idea to people.
I heard there are over 8ooo, banks in the U.S., far to many to nationalize.
I think most people would be happy with regulation that insures that the catastrophe that is taken place, doesn’t happen again.
One thing at a time.
T.D., Trust banks in the United States are scoring profits. Maybe they are practiscing the Canadian Bank system of regulation.
Good morrow, all!
If it sounds too good to be true, that’s because…IT IS!
The banks, which are helmed by people, people who should know better, people whose job it is to protect the deposits of customers and members, people whose jobs it is to act in trust for those who trust their money to these institutions, got GREEDY and STUPID.
In the real world, if you blow up a ballon too much, it explodes. In the banking world, banks call their deposits (money they would owe their depositors) “assets” and the loans outstanding (money owed to the bank by other people) “liabilties”, which is the reverse of the real world.
IT’S NOT THEIR MONEY! IT’S OUR MONEY! AND THEY LOST IT!
Nationalize them? Shag that, jail the shagging lot of them! They piled up these huge billions in profits, and suddenly, SUDDENLY, they’re sitting in front of politicians, begging, “Bail us out!” It’s called fraud, it’s against the law, and we should turf out all the drug users in the system and jail the bankers. Maybe, JUST MAYBE, they’d learn to do their jobs, which is to PROTECT our money, not piss it away.
There should be a sign in the industry: “You have to be THIS SMART to run a bank.” My money is in the bank of Smith & Wesson, in case anybody’s asking.
Don’t get me started…CTZen
Neil, our banks are more stable (and efficient) because, despite our complaining, the financial system is tightly regulated here. The banks maintain a monopoly which doesn’t hurt. In the States, it’s less regulated but more competition.
Pick your poison.
Well Commentator, judging by the results, I prefer our poison.
Yes, but we’re tiny on the international scene. We have no competitive edge on that front. If we were to ever deregulate (as was the discussion not to long ago), we’d get swallowed up by the big boys. Banks from Holland, Japan, France, U.S., UK and Germany would swallow us whole.
But yes, it’s an efficient system – albeit an old boys network. As I’ve said elsewhere, along with hockey, it’s one of the few things we actually get right.