Heartache: Greenspan backs bank nationalization
posted at 12:55 pm on February 18, 2009 by Ed Morrissey
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.
Blowback
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Picture caption: High Five!
loudmouth883 on February 18, 2009 at 12:57 PM
Then let Greenspan move to a country that actually has it.
Talismen on February 18, 2009 at 12:57 PM
There is another way – let the banks that bought the bad assets fail.
Vashta.Nerada on February 18, 2009 at 12:57 PM
I don’t understand why people listen to this man anymore.
He hasn’t really done anything and his predictions have never come to pass in any way shape or form.
Ugh!
upinak on February 18, 2009 at 12:58 PM
isnt greenspan married to that hideous looking andrea mitchell?? he is one of the main reasons for this mess we are in
ousoonerfan15 on February 18, 2009 at 12:58 PM
Confirmed my feelings towards this creep. The guy’s a Socialist. Anybody that ugly has got to be a Liberal!
Keemo on February 18, 2009 at 12:59 PM
I suspect aliens have stolen his brain.
TexasDan on February 18, 2009 at 12:59 PM
That’s what I was thinking…his policies on top of Dodd/Frank/ACORN/Obama/list-goes-on-and-on-and-on
Rogue on February 18, 2009 at 12:59 PM
Once upon a time, people had principles that didn’t change with a stiff breeze…….
search4truth on February 18, 2009 at 1:00 PM
Why should we listen to him?
He is an old fool who is partially to blame for the collapse.
izoneguy on February 18, 2009 at 1:00 PM
The central illogic of this is that the nationalization proponents who should know better think the govt. will do this “temporarily.”
When has government ever given back power it has accrued to itself?
VolMagic on February 18, 2009 at 1:00 PM
That would be called a backbone.
upinak on February 18, 2009 at 1:01 PM
Amazing.
gop moves far left to socialism.
Wow.
getalife on February 18, 2009 at 1:01 PM
Greenspan reminds me of the Titanic, making a U-Turn.
fogw on February 18, 2009 at 1:01 PM
I was thinking ‘the monster that’s going to eat your future’.
Vashta.Nerada on February 18, 2009 at 1:01 PM
And to all you Greenspan haters, get a clue. Guy is very smart. Don’t be reflexive idiots.
VolMagic on February 18, 2009 at 1:02 PM
some banks, temporarily
take a pill
(my comment on the headline thread was wrong — but the links were different) …
gh on February 18, 2009 at 1:02 PM
I agree, Greenspan is one big reason for the housing bubble.
Make money cheap as possible and keep those investors bborrowing.
larvcom on February 18, 2009 at 1:02 PM
If this guy is so dang smart. Please tell all of us here on HotAir how he has done anything for this Nation?
I don’t recall anything.
upinak on February 18, 2009 at 1:03 PM
Not smart enough to know what a bad idea this would be.
Vashta.Nerada on February 18, 2009 at 1:04 PM
OK. Take a look at the years he was FED chairman. Then look at a long term GDP tracking chart. Draw your own conclusions.
VolMagic on February 18, 2009 at 1:05 PM
But if you think Obama and Reidosi are going to let go once they have control, you’ll also believe that Obama will have transparency in government.
drjohn on February 18, 2009 at 1:05 PM
Former government employee argues Government should gain more power.
Film at 11.
Techie on February 18, 2009 at 1:05 PM
There is no such thing as a “temporary” government takeover of anything.
If the government seizes the banks, then they will forevermore belong to the government.
-Dave
Dave R. on February 18, 2009 at 1:06 PM
uh huh… and what has it come to now? Not a damn thing, but America broke, printing money out that we have no equity in and the fact that he was running the show then and now we see the “trickle down effects”.
Greenspan has never done anything for America…. NADA!
upinak on February 18, 2009 at 1:06 PM
A stark reminder that we ain’t in Kansas anymore.
Barak just makes a really lame Oz. Way over his pay grade.
Angry Dumbo on February 18, 2009 at 1:07 PM
Why to we, tough not many here on these threads, look for “geniuses” to solve these matters. Using my computer science education I use this anology: What is more succesful, large single main frames or distributing computing? It is the later. Millions of processors making decision yields better and quicker results than a single processor.
I would not even trust myself to make detail calls for these banks, only liberty. Let the chips fall where they may.
WashJeff on February 18, 2009 at 1:07 PM
Caption: Five. Five dollar. Five dollar foot-long!
Christien on February 18, 2009 at 1:07 PM
Don’t any of these fools know that businesses have to fail as some will succeed? MM is correct when she states “Suck it up”. Let them fail so the market will correct itself already!
larvcom on February 18, 2009 at 1:07 PM
Greenspan-Why would anyone listen to him? Really how much of what is happening can be led straight back to him? So now he would like to do some more damage? schlock and his wife too.
Dr Evil on February 18, 2009 at 1:09 PM
Five Dollar Footlongs, Wendy’s “Threenomics,” and Taco Bell’s “40 cent beef” are the only things keeping us from the brink of total economic collapse.
Tacitus_SGL on February 18, 2009 at 1:10 PM
Lame.
Never really liked Greenspan anyway.
Ryan Gandy on February 18, 2009 at 1:10 PM
GDP does not equal wealth of a nation. For example, if we were to borrow $1 Trillon dollars and spend all of it in one year. OUr GDP would increase by $1 trillon. Is our nation 1 trillon better off because our GDP is up? No, we have 1 trillion more in debt. GDP on its own is not an indication of success of a nation and its economy.
WashJeff on February 18, 2009 at 1:11 PM
It is sad when older people’s arteries start hardening.
I never have trusted his judgement a whole lot. Look who he married.
kingsjester on February 18, 2009 at 1:11 PM
kinda like those “temporary tax hikes” that Dems pitch…
search4truth on February 18, 2009 at 1:11 PM
this guy beds andrea mitchell.. seems that we should dismiss his utterances as further misjudgement on his part
gatorboy on February 18, 2009 at 1:11 PM
If there is one lesson of the great Washington-Wall Street Panic of 2008-09, it is that the geniuses who are charged with safeguarding our national economy do not have a clue between them, and because of this are in fact a menace to the economy. The ‘best and brightest’ are no match for something as big and complex as the US economy. We would do well to remove them from their pedestals, and to rethink our reliance on economic geniuses and titans, like Greenspan.
james23 on February 18, 2009 at 1:11 PM
Will this blowhard never shut up. His former gf Ayn Rand is rolling over in her grave.
flyoverland on February 18, 2009 at 1:12 PM
Duh. He set it up.
maverick muse on February 18, 2009 at 1:12 PM
Actually, capitalism is not the highest value on Wall Street. Predictable results are their highest value. Give them predictability, and they’re happy.
RBMN on February 18, 2009 at 1:13 PM
Well, that’s pretty much all of them … (the big national ones, anyway) …
paul006 on February 18, 2009 at 1:14 PM
Greenspan = part of the problem, not part of the solution.
AZCoyote on February 18, 2009 at 1:14 PM
The not-covered story of all stories, the number one culprit of our economic crisis, Allen Greenspan.
The media is derelict in many regards, this one in particular, in a big, big way.
Greenspan supported and furthered the incestual relationship between the Government and Wall Street, for years, and years, and years.
Not to mention his true incestual relationship btw. the Government and the media.
And this is a guy who used to faithfully attend Ayn Rand meetings, at ther house, the core of the core of objectivism.
He only late last year admitted to “some culpability”.
If you are a real reporter, you’ve got a big job and a phenomenal story to go after.
All who care, read this, from a substantive source.
Entelechy on February 18, 2009 at 1:14 PM
You make that sound like a bad thing.
Vashta.Nerada on February 18, 2009 at 1:14 PM
Yes, he’s married to her. Apparently, since 1997.
http://en.wikipedia.org/wiki/Andrea_Mitchell
See above.
BuckeyeSam on February 18, 2009 at 1:15 PM
5th Plank of the Communist Manifesto:
Centralisation of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.
Greenspan and the rest of them are dedicated communists. They’ve been working their entire lives to get to this point through incrementalism. There will be nothing “temporary” about it.
Buddahpundit on February 18, 2009 at 1:15 PM
Yep, and the smaller banks that were responsible lenders will grow to take their place.
Vashta.Nerada on February 18, 2009 at 1:16 PM
The world is full of schooled fools, the most dangerous of all.
You seem to be a faux Einstein, or suffer of impressed-by-said-to-be-smart.
Entelechy on February 18, 2009 at 1:16 PM
Caption: Who here blames everything on TurboTax, hands?
Christien on February 18, 2009 at 1:16 PM
See also: http://www.twincities.com/ci_11722986?source=most_viewed
US Bancorp CEO says banks were lied to…
Traffic Cop Timmy on February 18, 2009 at 1:17 PM
Exactly.
Im beginning to think this was all akin to the “starve the beast” logic behind smaller government reagan types. You underfund government to make it less effective at what it already does, then call for it to reneg on those responsabilities because it simply cant do it (ignoring that whole funding aspect).
Here, it seems, Greenspan did it in reverse. He overfed the economy to the point it couldnt function properly, then came out and said, “well now its our only choice”
ernesto on February 18, 2009 at 1:17 PM
Gollum?
patriette on February 18, 2009 at 1:17 PM
The Fed needs to get out of the business of economic growth. If the fed is to exist, it should have one, and only one goal, the stability of the dollar (i.e., inflation). Any other roles are frought with peril, as we have witnessed the last decade or more.
I got that book on order, can’t wait to read it.
WashJeff on February 18, 2009 at 1:17 PM
And suddenly, all those responsible and conscientious banks are now kicking themselves for being responsible and conscientious. In the end, it was all for nothing, because who knows whether they will survive the process of (wait for it) … pre-privatization.
Likely they won’t. The same hanky panky between the Dodds and the Franks and the Countrywides that secured a comfy bailout for all the irresponsible and skeezy institutions will make sure that all the goodies during “pre-privatization” stay with them, forcing out their competition (the good guys that played by the rules and didn’t need to cozy up to Frank and Dodd).
spmat on February 18, 2009 at 1:19 PM
Cat food really doesn’t taste that bad, with some tabasco and onion. Throw it in the microwave for a minute or two.
a capella on February 18, 2009 at 1:20 PM
Exactly.
bluelightbrigade on February 18, 2009 at 1:20 PM
Is it just me, or do all the people in the Sunggie commercial at the website, look like some kind of weird cult.
Troy Rasmussen on February 18, 2009 at 1:21 PM
Mr. Andrea Mitchell, a former proponent of the ideas of Atlas Shrugged, touches the robe of the Messiah and emerges a socialist. Only in America. Even Hollywood couldn’t have written this script.
technopeasant on February 18, 2009 at 1:21 PM
Save this for later:
Vashta.Nerada on February 18, 2009 at 1:22 PM
I don’t think all those words mean what you think they mean.
spmat on February 18, 2009 at 1:22 PM
Ironic. When the Senate sub-committee on banking brought in Greenspan, Bernacke and Paulson to testify, they didn’t seem to care what Greenspan had to say. Now he’s a sage.
What’s changed?
booter on February 18, 2009 at 1:22 PM
WashJeff on February 18, 2009 at 1:17 PM
Indeed, word for word!!!
Also, I don’t “hate” Greenspan. I hate what the allowed, furthered, and now stands for, having done a complete 180 degrees on his principles.
To be totally objective, the left and the right rode this horse, the old fool, for years, and profited enormously from him, until the entire cardboard house collapsed. It’s miraculous to me that he almost died scott free of blame. Only now are some waking up to his doings.
Entelechy on February 18, 2009 at 1:22 PM
Banking is already nationalized. The question now is what to do about it.
Bugler on February 18, 2009 at 1:23 PM
Something has got to be cut from this fiscal insanity. Two nation building wars and the taxpayers stuck with the bill on everything.
Where is the sacrifice from government?
Where is the accountability?
getalife on February 18, 2009 at 1:24 PM
These idiots shouldn’t make a move until they get someone independent to come in, assess the situation, and put the blame squarely where it belongs.
Barney Frank, Chris Dodd, Maxine Waters, ACORN, and too many others should NOT be within a country mile of this situation. In my monarchy, I suppose I’d let these turds live, but they surely would be stripped of their power and lined up outside of Congress on the steps in the stocks.
Hell, we’d be better off enlisting a small committee of Neil Cavuto, Dylan Ratigan, Jack Welch, and name your person, and give them subpoena power.
BuckeyeSam on February 18, 2009 at 1:25 PM
Why can’t old politicos walk off into the forest never to be heard from again?
GrayDog on February 18, 2009 at 1:25 PM
I just fired up the Xerox. Anybody need any extra cash?
GrayDog on February 18, 2009 at 1:27 PM
Do you do Yen as well? I don’t have a very large wheelbarrow.
Vashta.Nerada on February 18, 2009 at 1:28 PM
The easy money policy of the past decade have artifically increased our GDP above what it would have been without this policy (there is bone for you to say Bush’s GDP performance would have been less if this artificial housing boom was not promoted by the feds).
Now to use a term that progressives like, ORGANIC. We need an organic economy. One with minimal man-made fertilizers (i.e., gov’t intervention). Though one could say our economy is already organic since it is full of gov’t sh*t.
WashJeff on February 18, 2009 at 1:28 PM
I heard a talk-radio caller, an old Russian guy, say that what really brought down the Soviet Union was a jump in vodka prices. They could put up with a lot, but that was too much.
RBMN on February 18, 2009 at 1:29 PM
Greenspan and his head are a part of our problems. Nationalizing banks has 1 great consequence. People will withdraw their money and then the government will block withdrawals. People will not invest in a nationalized bank.
seven on February 18, 2009 at 1:30 PM
My guess is that you don’t know what the word “nationalized” means.
Maxx on February 18, 2009 at 1:31 PM
BuckeyeSam on February 18, 2009 at 1:25 PM
technopeasant on February 18, 2009 at 1:32 PM
A better example:
I sell you my watch for $100
You immediately sell it back to me for $100
Result: We both end in the same place we started. You have $100, I have my watch. GDP = $200
BPD on February 18, 2009 at 1:32 PM
Greenspan, like many of the other government insiders, cannot see beyond the failed institutions they supported. In his mind, a ‘temporary’ influx of government money will save those institutions he so cherishes. Obviously, he did not learn anything from the way that the S&L problem was handled under a real leader, Ronald Reagan.
Freddy on February 18, 2009 at 1:34 PM
I always wondered what a 10,000 dollar bill would look like once the inflation got out of control.
Bunsin on February 18, 2009 at 1:34 PM
Why do people listen to Greenspan? He is as much responsible as anyone for this mess.
We need to move back to Austrian Economics to save our souls and save our pocket books.
Tim Burton on February 18, 2009 at 1:34 PM
I want my watch back!
WashJeff on February 18, 2009 at 1:35 PM
better now
UNREPENTANT CONSERVATIVE CAPITOLIST on February 18, 2009 at 1:36 PM
And what exactly does the Constitution say about this? Oh yeah, it no longer matters.
DerKrieger on February 18, 2009 at 1:36 PM
Yeah, at least with respect to the big players. Deposits are already guaranteed, so to me that says effectively nationalized. Some questions remain, such as whether other stockholders and bondholders ought to lose their investments entirely, or whether that scares private capital from ever going back into financials.
I’m confused about why nationalization is preferable to allowing some banks to disappear entirely as failed businesses, and the relative pro’s and con’s of each approach.
(I heard a financial talking head speculate that the gov’t can nationalize a bank, then remove the mark to market requirement since it’s irrelevant at that point, and reap huge profits and gain control of the financial system therefrom. Pretty heady stuff.)
JiangxiDad on February 18, 2009 at 1:37 PM
Why is it some of the strongest proponents of socialism are those who have benefited so greatly from capitalism?
varnson on February 18, 2009 at 1:37 PM
Zimbabwe anyone?
Vashta.Nerada on February 18, 2009 at 1:37 PM
Better yet, I got my alchemy set in today. Now if everyone orders the same alchemy set, we will all be rich!!!
WashJeff on February 18, 2009 at 1:38 PM
If there is any justice, Obama will be on the 1 trillion dollar bill, which is inevitable at this point.
BPD on February 18, 2009 at 1:38 PM
Greenspan would look like the high priest of laisser-faire capitalism in that red Snuggie.
knangle on February 18, 2009 at 1:38 PM
Or at least Yoda
Vashta.Nerada on February 18, 2009 at 1:39 PM
Kansas anyone?
WashJeff on February 18, 2009 at 1:39 PM
Too Bad!
“I think that when you spread the wealth around, it’s good for everybody.”
-BHO
BPD on February 18, 2009 at 1:39 PM
That GDP “growth” was really one bubble after another, faux-prosperity built on the back of debt. At the heart of this financial crisis is the abuse of debt by individuals, corporations, and governments. That debt allowed us to overspend, thereby pulling forward demand, saturating us with stuff, and driving prices to absurd and unsustainable levels. We called that overspending “growth.” Well, that kind of growth has a ceiling as our country has learned the hard way.
flyfisher on February 18, 2009 at 1:40 PM
This guy was correct one time when he referred to “irrational exuberance”. That didn’t last very long, Clinton told him to shut up and say he didn’t really mean what he was saying. Of course being a smart man and knowing the hand that was feeding him he got back inline.
He is now doing the same thing choosing the same strategy. Keep in news and get speaking gigs make money keep celebrity super star status. He is definitely a smart man but an ethical and truthful person? One has to suspend disbelieve again.
rsl775 on February 18, 2009 at 1:43 PM
fixed.
the_nile on February 18, 2009 at 1:44 PM
Well, we can put Obama’s face on it, so we fix his problem with “all the people on the money” looking the same.
hawksruleva on February 18, 2009 at 1:44 PM
Deposits are not investments. When you deposit money in a bank, you are a creditor. You don’t put money in any bank that doesn’t have FDIC insurance, right? Putting a deposit into a “nationalized” bank is as safe as the gov’t which nationalized it. Investing in it might be an entirely different kettle of fish.
JiangxiDad on February 18, 2009 at 1:44 PM
My bad for asking for it back. I forgot the pledge I took on inauguration day.
WashJeff on February 18, 2009 at 1:44 PM
Yep
flyfisher on February 18, 2009 at 1:45 PM
Now this is where all conservatives need to step up and SMACK down greenspan..
this old fool for years said (hey we dont need to check whats going on in wall street)..
then when all hell breaks loose he suddendly becomes a democrap and says hey we need to be like russia
Bull crap
How about we just LET all of the banks fail
and then start over..
yes it will take 20 years to clean up this mess
But i would rather give my sons a conuntry thas is still free
than to have them live under pelozis and obams thumbs..
jcila on February 18, 2009 at 1:45 PM
That’s easy. Socialism never applies to the folks controlling the levers of power. Like Daschle and Geithner, Greenspan can talk about nationalizing banks because he’s got enough money to be safe if it doesn’t work.
But it MIGHT work, if we did it prudently. Of course, Obama will take Greenspan’s endorsement of “something” and use it to do something that DEFINITELY won’t work, and that Greenspan himself would object to.
hawksruleva on February 18, 2009 at 1:47 PM
Capitalism is a system of profits and losses. The filthy rich corporations and individuals, in the past few years, didn’t call the country and say “here, we have a surplus of wealth, you have some of it”.
Now, they’re all pulling violently at the national tit, and the morons like Emanuel and Greenspan, also the boy king Obama, are ready to oblige.
Let them go under. Otherwise the good companies and the honest workers and taxpayers are going to disappear. Then, all will be poor.
Entelechy on February 18, 2009 at 1:48 PM
That’s the most ridiculous thing I’ve ever seen on the Internet. Congratulations, General Ripper.
DrSteve on February 18, 2009 at 1:49 PM
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