Brookings - Compares Bank Bailout Options Including Nationalization

[Median Democrat]

This is somewhat wonkish, but it is only about 20 pages. Essentially confirms the point that no option is a panacea despite the prevailing sentiment on this board that one option or another is. The Brookings report does offer its own recommendations, which will probably leave you upset if you want some unqualified endorsement of one approach over another.

http://www.brookings.edu/~/media/Files/rc/papers/2009/0129_banks_elliott/0129_banks_elliott.pdf

/snip

It is becoming increasingly clear that the $700 billion in TARP funds will not be sufficient to restore the US financial system to good health. The first portion, of $350 billion, appears only to have helped prevent a complete meltdown of our financial system, but has not averted significant further deterioration in recent months, particularly among the weaker or less well-managed banks. The new Administration and Congress soon will be debating how to spend the second $350 billion, and possibly the size of additional amounts to be committed.

While some portion of the second $350 billion clearly will be spent addressing the mortgage foreclosure problem, there is much greater uncertainty over what further measures should be taken to shore up the financial system. Three particular ideas have received a growing amount of attention: establishing a “bad bank”, guaranteeing toxic assets, and nationalizing one or more banks. This paper explains the three approaches and their major variations, with a discussion of the pros and cons.

The author recommends a combination of toxic asset guarantees and a mild form of nationalization, as this approach could both provide badly needed stability to the system and also could be tailored to the specific circumstances of different banks.

/snip

It appears to me that Geithner's plan arguably tracks the mix and match recommendations offered by Brookings. But, there are some folks who resigned to viewing thinks in black and white terms, and if you are with Geithner, you are against liberals.

[DrToast]

1. Exactly!

It cracks me up to hear people complain about how the taxpayer gets screwed under Geitner's plan.

HELLO?!?!

There isn't a plan in which the taxpayers don't get screwed.

[Median Democrat]

2. Yup, Lost In The Outrage Of Why Obama Won't Nationalize Banks Is That Obama Has Done So

I know a lot of folks want to paint everything in black and white, but the FDIC has been on quite a tear in terms of taking over banks. Of course, this is not widely announced because that tends to undermine confidence in banks. So, if you blink, the bank you are doing business with may be taken over on a Friday afternoon.

http://www.marketwatch.com/news/story/Calamitous-day-sees-banks-credit/story.aspx?guid=%7B1B67729E-D317-41BD-9503-11DE3E9B48AF%7D

/snip

The pace of the ongoing credit crisis quickened significantly Friday when regulators seized three banks and placed two large corporate credit unions into conservatorship, citing a need to "stabilize the corporate credit union system."
Banks in Colorado, Georgia and Kansas were closed by regulators, bringing the number of bank failures this year to 20, while the National Credit Union Administration Board seized corporate credit unions in California and Kansas that have a combined $57 billion in assets. Corporate credit unions are chartered to act as a sort of clearinghouse for the credit unions that serve consumers.
The Federal Deposit Insurance Corporation said that Stockbridge, Ga.-based FirstCity Bank was closed by regulators, adding that it will mail checks to FirstCity's insured depositors Monday morning.

/snip