Sunday, February 22, 2009

Yes, Nationalize the Banks

It's ironic that, at the very heart of our "capitalist, free-market" economic system, sits a government-controlled monopoly. Money and banking are strictly regulated; we have neither a free market in money nor a free market in banks.

It doesn't surprise me that bankers and "money people" managed to influence or work around the regulations so that they became fantastically wealthy at our expense. They are rewarded with concentrated benefits and the rest of us will now suffer diffuse costs.

An editorial in this morning's New York Times says:
Americans have a visceral horror of the word nationalization. So call it restructuring or majority ownership. Or call it the taxpayers’ due after pouring in hundreds of billions of dollars in capital and guarantees and standing ready to pour in hundreds of billions more.
The idea of nationalizing most industries is horrible; can you imagine what nationalized, government-controlled supermarkets would be like?

But banks are different; we trust them with our money, trust the government to watch them and make sure they don't lose our money, and let them profit for providing that service. It's an interesting thought experiment to consider what the world would be like under a "free banking" system, but that's not the system we've got. Some of the bankers have violated our trust; it is now the government's job to deal with their failure. Dealing with them quickly and decisively is the key to pulling us out of the recession.

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