Be Sweden About It

February 18th, 2009 by Jason · 11 Comments · bailout, greenspan, win

greenswede

Warning: sky may be falling.

Former Fed chairman and known economic interventionist Alan Greenspan today predictably called for the nationalization of failing US banks, is what the headlines would read in an alternate universe, where we apparently now live.  Seriously, which one of you guys crossed the streams?  Crazy world we live in, up is down, Republican Senators also supporting nationalization

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

Alan Greenspan has himself been alive for one hundred years, so this is why he would say such a thing.  While he will likely never accept a bit of blame for helping cause the crisis, it’s nice to see him embracing a solution to it that might actually be viable.

What these wacky men are talking about is the Swedish model.  No, not the Swedish model with the blonde hair and the bikini and…well, this is a family site.  The Swedish banking model who is also surely very sexy and is the financial opposite of the Japanese model, which we are currently following, is what’s important here.  Under the Swedish model (where we’d all like to be, I’m sure), so called because it is what Sweden did, failing banks are nationalized until they are no longer failing banks and then banks are taken public again by the government, allowing the it to recoup most or all of the taxpayer money it sinks into the banks.  Crazy talk!

The Japanese model is to continue throwing money at failing banks, hoping that some of it will be magic money that fixes everything.  It worked for Japan about as well as it’s been working for us so far, which is all the reason in the world to assume it will begin to work soon, maybe after the next capital injection.  We just need to keep believing, even though Citi and BoA have had more given to them in bailout funds than either company is actually worth right now.

11 Comments so far ↓

  • Nemo

    Can’t you guys run some “Swedish model” pictures? It’s the perfect opportunity…

  • Jason

    I would argue that Greenspan was a handsome man in his day, but I have seen pictures from his day, and he was not.

  • pants

    i LOLed at “known economic interventionist.” I love how the media keep quoting Greenspan as some authority, after he didn’t uh…so to speak…take away the punchbowl after the low-interest-rate party got started.

  • alyx

    I think that with some of the garbage assets our banks have on their books, the “taken public again by the government, allowing the it to recoup most or all of the taxpayer money it sinks into the banks” part of the equation would be difficult to bring to fruition. But maybe it’s better than having the Fed print more currency and take trillions more of those assets piecemeal onto its books.

  • CB

    I’m not sure I understand how nationalizing banks means the fed would print less currency or is a good solution in general. How does the fed pay off the debts the banks owe once they’re nationalized? I’m thinking that as long as the fed is taking on the questionable role of Financier of the Last Resort it must ultimately print more money to keep the ponzi system afloat. I’m doubtful it makes a difference to nationalize them in the long run.

    At any rate, I’ve always appreciated this bit from Herbert Spencer:
    “The ultimate result of shielding men from the effects of folly is to fill the world with fools.”

  • Jason

    I think the chief advantage to nationalization is that the feds get to call shots for the money they sink into the banks. While normally I would agree that the government isn’t good at running itself, let alone other companies, I can’t imagine their doing a worse job than execs at a couple of our largest bailoutees.

  • CB

    the gov’t will do a better job than the bailoutees? I feel like another big bucket of fail is getting ready to be poured on our heads.

  • Jason

    Not better, just not worse than.

    Although if it IS another bucket of fail, that’s good for us here at LOLFed.

  • CB

    it would have been cheaper to let the banks fail and start new ones.

  • CB

    and yep, I see many more lols in lolfed’s future

  • Jason

    Yeah, hindsight is always 700b/700b.

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