Bank Nationalization: "As American As Apple Pie"
Sam Stein stein@xxxxxxxxxxxxxxxxxx | Reporting From DC
February 22, 2009 02:16 PM

Bank Nationalization: "As American As Apple Pie"

Even before the panel discussion commenced, George Stephanopoulos knew
that this would not, in actuality, be a debate. The topic was the
nationalization of major U.S. banks, which just a few weeks ago was
treated as either inconceivable or illogical. But with the credit
crisis growing worse and chorus of political support growing louder,
the ABC host opened up a segment with more of a statement than a

"Over the last several weeks, you have seen something that was
radioactive even six months ago, the idea of nationalizing major banks
in this country, moving towards something of a consensus,"
Stephanopoulos said.

There wasn't a panelist who disputed the idea -- indeed, naysayers
were mocked. Nobel Prize-winning economist Paul Krugman scoffed at the
notion that the White House was one of the few remaining holdouts,
picking apart the Obama administration's comment as a sophisticated

"That Gibbs statement was masterful," Krugman said of the remark by
Obama's press secretary that a "privately-held banking system"
regulated by the government was optimal. Some interpreted it as White
House opposition to nationalization, but Krugman argued otherwise. "It
sounded like a reassurance [but he] was actually saying what everybody
believes. Nobody wants the government running the banking system for
any length of time."

Rather, Krugman argues, the government's involvement should be
temporary -- just long enough to wipe out shareholders, fire
management, clean up the banks and quickly resell them into the
marketplace. He added that it seems likely that there is no other

There was the conservative George Will:
"With credit now treated essentially as a public utility, the
difference between what we have and what nationalization would be is
marginal. One number: the market capitalization of Bank of America is
$19 billion since October they have received $45 billion in public
funds. So what's the difference?"

And then there was Krugman, who summed it all up by calling
nationalization "as American as apple pie."
"We have nationalized 14 banks already this year. We don't call it
that but there were 14 banks, two a week that the FDIC seized because
they didn't have enough assets to pay their depositors. The Federal
Deposit Insurance Corporation says, 'ok, we are taking over. We are
cleaning out the stockholders.' We are going to do exactly, as Nouriel
said, we should be doing for some major banks. So actually
nationalization as properly understood is probably as American as
apple pie."