But let's consider a second way the government could address this whole mess. The government could say to bankers, okay dude, let's get real. Banker Bob is just going to have to recognize his loss on Caitlin's dollhouse. He's going to have to honestly admit that yes, he's 50 dollars in the hole. So, his capital is wiped out. Plus, he owes his depositor, Alex, 40 bucks.
However, in this second plan, the government comes in on the other side of Banker Bob's balance sheet and covers his losses -- it provides 40 dollars to pay back Alex, and it replaces the 10 dollars in capital that got wiped out and that Banker Bob thought he had lost. Now, however, the problem is, if the government puts in that much capital, then the government now essentially owns the bank.
Bob's response to this is: I don't like this plan. I lose my job. I don't like this kind of government takeover of private industry. It's nationalization. I hate nationalization. This seems like socialism to me.
But, at least this way, as taxpayers, we have an ownership stake in a bank, not just some crappy, overvalued dollhouse. The government will clean the bank up, sell it to someone else down the road, and ultimately we'll get most of our money back. And frankly, the taxpayers don't really mind that the bankers will lose their job and their money. After all, they're the ones who got us into this mess. And, besides, this is the traditional way that governments around the world usually fix banks that get into this kind of a mess.
======================
For the last 20 years, Simon Johnson has worked on banking crises all over the world. As already mentioned, he used to be the chief economist for the International Monetary Fund, an organization that has stepped in, over and over around the globe, to fix just the kind of crisis we're in now. And the IMF with the United States pushed countries in similar situations to do what? To nationalize their banks -- temporarily. Examples: Indonesia, 97, Korea, 97, 98, Russia, every couple of years, Argentina, in 2002.
Simon Johnson continues: "What would the U.S. tell the IMF to do if this were any country other than the U.S.? Assume you covered up the name of the country, and just showed me the numbers, just show me the problems, talk to me a little about the politics in a generic way. What would the U.S. tell the IMF to do? I know what they would tell them and I know what the IMF would do: Take over the banking system. Clean it up and re-privatize the bank as soon as possible.
So why is the United States not taking its own advice?
Next Page 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
4
1
1
