Suddenly, Lindsey Graham’s a Greenspanian, and the wrong man moved.  Alan Greenspan told Financial Times that the US may have to nationalize banks as part of a once-per-century necessity.  It may be the only way to dispose of the toxic assets created by, er … other government interventions in the banking industry:

The US government may have to nationalise some banks on a temporary basis to fix the financial system and restore the flow of credit, Alan Greenspan, the former Federal Reserve chairman, has told the Financial Times.

In an interview, Mr Greenspan, who for decades was regarded as the high priest of laisser-faire capitalism, said nationalisation could be the least bad option left for policymakers.

”It may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring,” he said. “I understand that once in a hundred years this is what you do.”

Groovy.  Suddenly, nationalization is the new Snuggie.  It’s a new, hip blanket that gives the illusion of security.

Greenspan does warn that the process of nationalization matters.  Given that the world faces a huge credit crisis, the government has to nationalize the banks in a manner that doesn’t damage “senior creditors” of the banks.  Those creditors have to have money to lend elsewhere, and losing massive amounts of value in the banking debt they hold will further constrict the credit markets.  If the US and other governments can draw out the toxic assets without damaging these creditors unduly, then temporary nationalization could succeed in salvaging the economic infrastructure.

What does that mean?  The government absorbs all the losses.  That means you and me.  We did something similar with the Resolution Trust Corporation to settle the savings-and-loan collapse of the late 1980s, and managed a soft landing for everyone, including taxpayers.  However, that was on a much smaller scale than what Greenspan proposes here, and it will take much longer for those assets to regain value, if they do at all.

Get ready for it, though.  With Greenspan on board, there aren’t many voices left to fight it.