Bank nationalization

A recent Thomas Ferguson and Robert Johnson article advocated the adoption of a failing bank nationalization scheme akin to the one implemented by Sweden in 1992. They pointed out that this strategy would be the simplest and cheapest to implement. It also would stand a chance of succeeding, unlike the "throw vast sums of money at the problem" technique championed by the recently departed Paulson and Bush. A nationalization program is not flawless, however: Nationalization could provide the well-connected hedge fund or equity firm an opportunity to loot the public if the bank nationalization program fails to include adequate controls. Oversight and accountability were conspicuously absent from the TARP program. It would also help matters if the sun were allowed to shine on the workings of this national bank, especially since publicity was also lacking in Paulson's program.

Ferguson and Johnson conclude by noting that:

Temporary nationalization of banks is, indeed, the best way for the United States to avoid ending up with a "lost decade" like Japan in the 1990s. It gets the toxic waste out of the system, and not by robbing the public, making possible the resumption of economic growth. But without stringent safeguards on assets sales and vigorous anti-trust regulations, new rounds of financial pathology will become inevitable.

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