Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“My definition of a free society is a society where it is safe to be unpopular.”     Adlai E. Stevenson

February 15, 2009

Maybe The Republicans Really Are The Stupid Party

by Doug Mataconis

Did you ever think you’d see the day when Republicans argued in favor of nationalizing the banking industry.

Well, you made it:

Republican Sen. Lindsey Graham of South Carolina of the Senate Budget Committee said today on “This Week” that he is open to “nationalizing the banks.”

“I think if you put most of our major banks under a ‘stress test,’ they’re going to fail,” Graham told me.

“This idea of nationalizing bank is not comfortable but I think we have got so many toxic assets spread throughout the banking and financial community throughout the world that we’re going to have to do something that no one ever envisioned a year ago, no one likes,” he said.

“To me banking and housing are the root cause of this program,” Graham said. “I would not take off [the table] the idea of nationalizing the banks.”

However Democratic Sen. Chuck Schumer of New York argued against nationalizing the nation’s banks.

“You can have a big, bold plan without nationalization,” Schumer said.

Let’s think about this we’ve got a Republican Senator and a Democratic Senator, and a very liberal Democratic Senator at that, both talking about the same issue.

And it’s the Republican who argues in favor of nationalization.

Remember that the next time the GOP accuses the Democrats of being socialist. Maybe they need to look in the mirror.

Cross-posted at Below The Beltway

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6 Comments

  1. As an atheist, I looked at “the troubles” in Ireland with a bit of a jaundiced eye… I.e. “they’re going to kill each other over the minimal difference between Catholicism and protestantism?! WTF?!” (BTW, I realize it was more complex than that — but that was certainly one of the big touchpoints.)

    As a libertarian, I look at the Republican/Democrat divide the same way. The parties think the difference between them is a uncrossable chasm, while we see that it’s merely a ditch.

    Comment by Brad Warbiany — February 15, 2009 @ 8:24 am
  2. If Congress ever actually tried to nationalize the banking system – more than the partial ownership they now already have – I wonder what recourse the banks would have.

    I’m not an attorney, so I don’t know all the constraints about whether a bank assailed in this way could successfully bring suit. I imagine such a stupidity would be attempted using the interstate commerce clause? That and the “provide for the…general Welfare” clause seem to be the only justifications ever used now (when justifications are even sought). I imagine it’s because the clauses so widely open to interpretation that legislators can contort them to mean anything they like.

    It’s so much easier to wield power if the document meant to constrain you means anything you want it to.

    Comment by Akston — February 15, 2009 @ 10:39 am
  3. I think the better option to nationalization would be the good bank, bad bank. The only problem is how do we figure out how much to buy the ‘toxic’ assets for? Instead of stress testers maybe Tim G. should send in hordes of accountants to trace back the securities to the houses (collateral) Then reassess the price of each house and then reissue securities based on the new collateral. You could then determine the losses and exchange the old securities for the new securities. We would then know how much money the government needs to ante up. We should then recover the money by taxation when the economy improves. Letting the banks fail would mean we would have to wait until the shock wears off the system, which could take a couple of years or a decade. Nobody knows. Plus it would devastate the economy and reduce the US to a third world country. This way we could at least hold on for a few more decades. In the end the savers loose, inflation reduces the load of the debt and we inflate our GDP to 22 trillion by 2015, thus paying of our debt back down to 60% of GDP. I say if you are holding back purchasing the big screen tv do it now before your money is worth less.

    Comment by Amit — February 15, 2009 @ 1:53 pm
  4. Is there some defensible reason – which doesn’t require a crystal ball or hysteria – that requires the federal government to reward or restructure failed banks?

    It seems like write-downs, write-offs, Chapter 11, Chapter 7, acquisitions and mergers should be able to handle these bad debts just like they have for the last several decades, if not centuries. Don’t failed business models need to fail in order for creative destruction to strengthen the economy as a whole? Doesn’t rewarding or excusing mal-investment just garner more mal-investment? Wouldn’t any investments of value still hold value in the market at large?

    So a bank that was too tied to these new instruments suffers from them. Why should all taxpayers (and indeed all holders of dollars, as a result) suffer instead?

    Solvent banks could take up the slack and buy what’s worth buying. As a result, more banks would be solvent.

    No one likes to throw up after eating spoiled food. But as bad as that experience can be, trying to continue eating the spoiled food and simply segregating the parts of your digestive system that harbor it means a longer, sicker experience for the organism as a whole. And the end result is much more likely to be fatal than simply allowing the system to correct itself naturally, as it’s done for quite a long time.

    Comment by Akston — February 15, 2009 @ 5:20 pm
  5. As long as we’re nationalizing things, how about nationalizing health care, too.

    Comment by Dr. Joe — February 15, 2009 @ 6:43 pm
  6. The banks that are on a course to failure need to fail. The system of bankruptcy in this country is designed to liberate productive assets from bad management and dysfunctional corporate DNA. The bailouts and stimulus packages only punish the prudent for the good of the inept.

    Comment by Quincy — February 16, 2009 @ 11:01 am

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