Kevin G. Hall writes for McClatchy Newspapers:
If the plan doesn’t work, the next step might be nationalizing some banks, as some high-profile analysts have advocated, including former Treasury Secretary James Baker, pointing to Sweden’s successful exercise in the early 1990s.
Geithner rejects the parallel.
“We’re the United States of America. We are not Sweden,” he said, arguing that the U.S. financial system is much larger and more complex than any other and includes the world’s largest capital markets and many nonbank financial institutions.
Which may be the problem. Maybe the whole financial sector needs to be taken down a few pegs.
I’ve mentioned Thomas Geoghegan’s “Infinite Debt” article in the April issue of Harper’s a couple of times. Very simply, the financial sector and the financial services industry is eating America. Directly or indirectly, we’re all indebted to and working for the financial industry. We’re turning into sharecroppers, basically, except the “crop” is money.
In a balanced economy, the financial sector should support manufacturing and labor. Instead, the financial sector drains manufacturing and labor.
What we’re looking at here is capitalism hitting the rocks. Fifty years ago the world seemed locked in a giant struggle between capitalism and communism. Communism collapsed from the inside; it is not a sustainable economic system.
Now its capitalism’s turn. I am all for private ownership and entrepreneurship and all that, but if capitalism isn’t kept in check it will eat itself. That’s what we’re seeing; capitalism eating itself. The financial sector metastasized and is destroying the economic body.
On the up side, Binyamin Appelbaum and David Cho report for the Washington Post that
The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.
This suggests the Obama Administration hasn’t ruled out taking stronger measures. It would be good for the administration to declare right now that if the Geithner plan doesn’t do the job, receivership is the next step. That would be reassuring to me, at least.
This morning’s smoke signals suggest that Geithner’s “we’re not Sweden” comment was perhaps not a statement of opposition to the concept, but a description of technical challenges. Right now, a US version of the Swedish solution would require taking over institutions that are not technically ‘banks’ under the authority of the FDIC. Perhaps Geithner was mostly saying he didn’t have the legal power to try a Swedish solution here.
It would be pretty to think that yesterday’s loans for auction scheme is a pretty bauble to distract Wall St. while the legislation required to completely reform them gets passed. It would be much more palatable if it is actually just one part of a more comprehensive restructuring program. I await future developments.
Capitalism is, actually, promoting Marx’s Communism quite well. See, communism wasn’t tried. The USSR had a sham communist state, but really to get there, as Marx pointed out, the world will first experience the excesses of Capitalism. Only after that will we understand Communism. Well, the Capitalists sure are showing us some excess, aren’t they?
So, now, even the Truck Drivers understand the excesses of Capitalism. (no offense to truck drivers: Rush was lamenting having lost the Truck Drivers on his show the other day).
Now its capitalism’s turn. I am all for private ownership and entrepreneurship and all that, but if capitalism isn’t kept in check it will eat itself. That’s what we’re seeing; capitalism eating itself. The financial sector metastasized and is destroying the economic body.
True, true, true.
In commenting on a recent post, I mentioned that our stock market-based system hasn’t ever really worked. But the only potentially-viable alternative that I could think of involved the Scandinavian countries. I’ll accept biggerbox’s possible explanation for Geithner’s remark… for now. But old Tim’s going to have to start doing some original thinking real soon, or no fix is possible. Like biggerbox, I wait and hope.
The claim made by Geithner’s boss is that we can’t use the Swedish solution because we have many more banks and they had only a half dozen that needed taking over, but Krugman and others point out that we have only a half dozen banks that need taking over, as most are in okay shape. So the claim is BS. It’s classic American crying “socialism!” as a way to get people to back off from a sensible solution. It’s time we stopped listening to these cries.
Seems to me that capitalism got ‘toxic’ when the free-market advocates got in the driver’s seat. The free-market concept, to my way of thinking is akin to political anarchy – in other words it’s economic anarchy. We know that a society falls apart under political anarchy, so why in hell would we imagine that a society won’t fall apart under economic anarchy.
Geithner rejects the parallel.
“We’re the United States of America. We are not Sweden,†he said, arguing that the U.S. financial system is much larger and more complex than any other and includes the world’s largest capital markets and many nonbank financial institutions.
So? I still haven’t heard a good, specific reason or reasons why not, but I have seen lots of doubts expressed about Geithner’s current plan. Because we taxpayers (and our heirs) are on the hook for billions to try and preserve the status quo, Geither owes us a detailed explanation as to why the Swedish alternative – or any other – won’t work. All I hear from this man (and Obama) is BS without any solid arguments for the path they’re taking, or solid arguments against the alternatives.
Maybe the fUSSR wasn’t the only casualty of the Cold War…
Well I saw a study on tone that said men in Sweeden have the lightest male voices on earth, and females have the deepest. I’m not really into the androgyny of the voices, I like the different genders to sound like different genders. Also they lack many people who aren’t white.
Otherwise Sweeden is fine.