Graham: Nationalizing Banks Should Be On The Table

In a gloomy segment about the financial sector on ABC'S This Week, two self-avowed fiscal conservatives said that the U.S. Government should at least consider nationalizing the country's banking system as a means of moving beyond the current lending crisis.

"This idea of nationalizing banks is not comfortable," said Sen. Lindsey Graham (R-SC). "But I think we've got so many toxic assets spread throughout the banking and financial community, throughout the world, that we're going to have to do something that no one ever envisioned a year ago, no one likes. To me, banking and housing are the root cause of this problem. I'm very much afraid any program to salvage the banks is going to require the government... I would not take off the idea of nationalizing the banks."

The remark prompted a bewildered smile of sorts from fellow panelist Maxine Waters (D-CA) who said, to no one in particular, "We have come a long way."

Indeed we have. While Graham was supported in his assessment by Waters and Rep. Peter King (R-NY), both of whom said nationalization should remain on the table, he found opposition from his Democratic counterpoint on the panel, Chuck Schumer.

"I would not be for nationalizing," said the New York Senator, whose constituency includes the epicenter of the U.S. banking industry. "I don't think government is good at making these decisions."

Another voice in opposition to nationalization is President Barack Obama, who in a recent interview with ABC rejected the "Swedish" approach to revamping the banking system. "We want to retain a strong sense of that private capital fulfilling the core -- core investment needs of this country," said the president.

Sunday's discussion was prompted by a Washington Post op-ed that morning by economist Nouriel Roubini entitled: "Nationalize the Banks! We're all Swedes Now."

Nationalization is the only option that would permit us to solve the problem of toxic assets in an orderly fashion and finally allow lending to resume. Of course, the economy would still stink, but the death spiral we are in would end. [...]

Nationalizing banks is not without precedent. In 1992, the Swedish government took over its insolvent banks, cleaned them up and reprivatized them. Obviously, the Swedish system was much smaller than the U.S. system. Moreover, some of the current U.S. financial institutions are significantly larger and more complex, making analysis difficult. And today's global capital markets make gaming the system easier than in 1992. But we believe that, if applied correctly, the Swedish solution will work here.

Comments

[BobNFla]

LIndsey, are you serious? I hate to burst your bubble, but you guys on Capital Hill are not capable of running the government let alone the banks. You were the ones who pushed us into this mess in the first place. I'm sorry but the only excuse you can have for nationalizing is to justify the billions you're throwing at the banks with no restrictions. Some would call that a quasi nationaliz­ing.......­...and, you know what? Thats not working either. The government had a chance to prevent this, its called "oversight", it wasnt done. The banks convinced (or fooled) you into believing they could self regulate. Sure, thats like the fox guarding the hen house. With all due respect, sir, there are other means that will get us out of this mess.

[lightningbolt]

-"I would not be for nationalizing," said the New York Senator, whose constituency includes the epicenter of the U.S. banking industry. "I don't think government is good at making these decisions."

To all those who think government is not good at making decisions and running institutions, I say it depends on what government. Bush's government was obviously terrible at making any decisions. Obama's government may not be so bad. Government can run efficiently if there is the will to do it at the top.

[movecenter]

This just sounds strange coming from a senior GOP member....­especially after all the accusations of socialism the GOP tossed at Obama during the election. Sounds like either a political setup, or a major contradiction to previously held GOP positions.

[indi1216]

you should know that that is how Rethugs work...it is ok for them to suggest any plan and it is a good plan, but for dems to suggest it, it is socialism...they are the perfect example of an obstructionist.

[ssfahrer]

The problem with nationalization of the banks (or anything else) is that once nationalized, they would NEVER be "reprivatized". They would remain PERMANENTLY government run entities or (preferably) go bankrupt! Our politicians would rather DIE than give up any of their power-- we are NOT Swedes! And Graham is simply CLUELESS!

[indi1216]

not true..we did this before.

[frantaylor]

The ratchet clicks over and the banks win every time. Socialize losses, privatize profits.

[MadMaddie]

Our banks are abso-frickin-lutely insolvent.
Anyone who refuses to see that is simply willingly blind.
Despite his usual ineptness , maybe Graham's eyes are willing to see a little now.
Nationalize the damn things already, then allow we the people to buy the shares.

Read the Telegraph UK's article about financial expert Nouriel Roubini's cry for the US to nationalize our insolvent banks in order to save ourselves (and the rest of the world) from complete financial ruin. "Nouriel Roubini trusts Timothy Geithner to get it right on US banks" Monday, Feb. 16, 2009, www.telegraph.co.uk

[justobserve]

I agree that nationalize banks should be on the table. When things get better, every citizen should be able to buy the banks' shares at their IPOs, then they would become public companies again.

[apduncan1]

We need to admit it: We are broke.

[SEQUOIABISON]

Senator Graham bet the ranch and staked his future on a John McCain victory, now he acts as though elections are insignificant.

Well let me remind the good senator that the reason we have elections is because the people decide who they want to represent us.

Elections certainly do have consequences and Senator Graham, your opinions and ideas were voiced loud and clear for almost 2 years but resoundingly rejected.

It is unsportsmanlike to be a whining sore loser, you should learn some manners and be more respectful of the peoples choice about who should run this country, if you want a bigger say in how government is run, win elections, otherwise accept defeat graciously and be the Loyal opposition not the whining opposition.

[cadbury]

I don't understand this comment. By suggesting that nationalization of banks should be seriously considered, Graham is taking a more liberal/progresive approach than Obama or Schumer!

[SEQUOIABISON]

I am still not clear about whether or not nationalizing banks is a good thing, the ramifications of this would have to be examined very carefully, not sure if it would be a liberal or a conservative move, it would depend upon the arrangements for executives etc. I am always suspicious of the motives of any extreme conservative like Graham the war Hawk.

But my basic gripe with Graham has more to do with his whining about how Obama will destroy the country with this stimulus package and how he claims the president lied about bipartisanship with his Lloyd Benston type of ranting and how he knows bipartisanship and this is not bipartisanship.

His ideas along with McCains have been rejected and we democrats can certainly not expect any cooperation from him or the sore loser McCain, just partisan rhetoric and attempts to undermine our new president.

[SouthPrairie]

You cannot have a team of rivals without rivals being willing to be team players. There are some, and I believe there will be more, because if you are genuine and sincere about putting COUNTRY first, then you would want Obama to succeed--period. Those who would undermine his success for the sake of their fantasy about getting back in power in 2010--undermine their country at a significant juncture.

Yes we can--yes we can find enough people who care enough to work together as a team.

Yes we can--yes we can try and work at acknowledging that TAX PAYERS deserve to be REPRESENTED by their representative government.

Yes we can--yes we can realize that fleecing our country for 8 years comes at a political cost and that to regain the trust of the American voters you lied to, you need to show that you care about AMERICAN VOTERS!!

Yes we can--yes we can reach out our hands to you even though you enabled some horrific decisions, we can because we sincerely care about our country and do not want to pit party against party--however, we are willing and able to fight back if you interpret our reaching hand as that of a gullible sap.

We can--CAN YOU?

[juangault]

This is off topic, but an article written about in a New York Times is worthy of keeping aware of. It's the choice of helicopters. Bush gave the "Marine One" business to Lockeed. They don't even make copters. The article said it was a reward to some countries that participated in his Iraqi cool aid crusade. Actually, it was a reward to the LDS folks for their lock block support of the Republicans. The LDS learned well from the east coast wealthy Italians who opened casinos in Nevada. 40 to 50 years later, they now control big companies like Lockeed, and Kaiser Permanente. Sikorsky should have the contract,
we need to keep this business at home, and keep the profits from going to gold oxen.

[vandegrasse]

The Republicans are arguing for a sensible approach at last regarding the economy and the Democarats are looking more like nitwits. What's going on here. Power sure does corrupt quickly these days.

[Michael Garrison]

Roubini is correct. Obama is walking a tight rope as he is getting a sense of how much Sheila Baer the world can take. To make it work, Obama and Geitner need the R's to beg for it. Lindsey Graham is not some lost southern sheep, he is a very pragmatic politician who when he returned to his state and found the support that the president's stimulus package had exceeded his wildest imagination, when he realized that Obama's win in South Carolina was not some whacked oddity, but a taste of politics to come and as he and others have begun to understand the problem with toxicity and derivatives, he is beginning to realize that heavy FDIC involvement, America's creative answer to nationalization, is likely the only way out.

I urge all who are interested in this to follow the Lehman bankruptcy proceedings involving the various counter parties to derivative transactions. It has been my belief that Paulson let Lehman fail as a shot across the bow to not only the investment banks in this country, but the financial industries world wide: deal with this or face a similar result.

What is not being discussed, but will be soon, is the 50 trillion + .in derivative contracts that have to be reconciled. That issue will require a global resolution. Obama is likely biding his time before he comes forward with a plan that will require all nations to recognize their vulnerability and deal. The US can not do this alone.

[bongstradamus]

Are most conservatives even smart enough to realize their leaders are pleading for socialism?

What whacked-out bizarro world are we in where republicans are saying the only way to save capitalism is to embrace marxism?

[Angelic11]

This may sound like a bit naïve but I just want to get you guys take on this; why do they want his autograph?

[DosGatos2]

Don't be fooled by Graham's apparent turn toward "socialism". All this means is that Repubs have figured out that this is a way to socialize the debt while privatizing the profits.

They want the federal government to scrub off all the bad debt so that solvent banks with clean balance sheets can be sold to their rich friends and campaign donors, who will then lobby for less regulation on the freshly scrubbed banks under the theory of "we've learned our lesson, let us self-regulate". Then, in a few years, these people will screw up the banking system again and ask for another taxpayer bailout.

Lather, rinse, repeat.

[Pegi]

he is one of the worst s c u m b a g s of all! be careful of this guy - scrub, rinse repeat is correct; many times over!!