President Obama got the question on bank nationalization today and here’s what he said:
Sweden, on the other hand, had a problem like this. They took over the banks, nationalized them, got rid of the bad assets, resold the banks and, a couple years later, they were going again. So you’d think looking at it, Sweden looks like a good model. Here’s the problem; Sweden had like five banks. [LAUGHS] We’ve got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the problems in terms of managing and overseeing anything of that scale, I think, would — our assessment was that it wouldn’t make sense. And we also have different traditions in this country.
Obviously, Sweden has a different set of cultures in terms of how the government relates to markets and America’s different. And we want to retain a strong sense of that private capital fulfilling the core — core investment needs of this country.
And so, what we’ve tried to do is to apply some of the tough love that’s going to be necessary, but do it in a way that’s also recognizing we’ve got big private capital markets and ultimately that’s going to be the key to getting credit flowing again.
So it’s a good idea, but we’re not going to do it because people wouldn’t like it. Uh huh. President Obama is assuming a static public opinion that isn’t going to change. We all know this isn’t true. If you asked Americans a year or two ago how they’d feel about giving away hundreds of billions of dollars to private banks without real oversight or compensation, they would have laughed at you. If you asked some Americans 50 years ago how they’d feel about a black man named Barack Obama being elected President of the United States, they would have beaten you up.
Public opinion is thoroughly variable and depends on public figures to delineate what is reasonable. If Republicans are against nationalization, and Democrats are against nationalization, then nationalization must be a crazy idea. Same goes for gay marriage. Not to mention, I think Americans would be receptive to the argument that we shouldn’t be giving away billions to support bank shareholders who screwed us all over in the first place. As Paul Krugman (about whose rise I’ll write a blog eventually) blogs, we nationalize banks all the time.
What I haven’t seen is an ideological argument in favor of nationalization. Maybe it’s because the pragmatics are clearly on our side and we’re trying to his our socialist colors, but I’d like to see more about why democratic control over a nation’s financial system is a good idea under any economic conditions.