Posts Tagged ‘nationalize the banks’
TBTF
Naked Capitalism has a somewhat speculative but persuasive take (via Vu) on why the government still isn’t breaking up the too-big-to-fail banks.
…the government’s failure to break up the insolvent giants – even though virtually all independent experts say that is the only way to save the economy, and even though there is no good reason not to break them up – is nothing new.
William K. Black’s statement that the government’s entire strategy now – as in the S&L crisis – is to cover up how bad things are (“the entire strategy is to keep people from getting the facts”) makes a lot more sense.
Buying the Bezzle
North Carolina’s Rep. Brad Miller (the Fightin’ 13th!) is trying to figure out what the banks are up to. More at MetaFilter.
John Kenneth Galbraith wrote that embezzlement is “the most interesting of crimes” for an economist. Embezzlement is almost always eventually discovered, but for a time results in “a net increase in psychic wealth,” when the embezzler “has his gain” and the victim doesn’t miss it. Galbraith called the undiscovered and therefore unfelt loss “the bezzle.”
According to Krugman, the stock in banks that are solvent only by virtue of an “optimistic” valuation of their assets “isn’t totally worthless,” but the stock’s value is “entirely based on the hope that shareholders will be rescued by a government bailout.” The “huge gift to banks shareholders at taxpayer expense,” Krugman said, was likely to be “disguised as ‘fair value’ purchases of toxic assets.”
So maybe insolvent banks are stalling for time, hoping that the economy turns around, that home prices will go back up, or that sick borrowers will get well and unemployed borrowers will find jobs. Maybe they want to enjoy the “psychic wealth” of paper solvency for as long as possible.
And maybe they’re hoping we’ll buy their bezzle.