We now have reached a point where the likes of Paul Krugman, James Baker, and hundreds of other leading economists and thinkers agree on a basic method to clean up those banks that are hopelessly insolvent. For Heaven's sake, if an old Reagan Revolutinary like Baker is in favor of temporary nationalization, then that would indicate a wide base of support for such an option. That would meet most people's definition of "bi-partisan." Contrast that with the extreme unpopuliarity of the endless bailouts.
Ah, but all of these foks - acting in good faith - lack one thing: access to the room where the endless bailouts are chosen as the best possible alternative. It is no wonder that Smith is in despair:
As readers may have inferred, I am distressed at the reluctance to tackle
methods to restructure or unwind structured vehicles, which could require
legislative fiat. Admittedly, the will to take radical action of any sort is
notably absent in DC, along with the awareness that the provisions of most
structured deals effectively prohibit debt restructuring/renegotiation, which is
normal for traditional loans and bond deals. It is not much of an exaggeration
to say that the economy is being held hostage by these vehicles, yet it is
somehow unacceptable to even contemplate cutting this Gordian knot.
Baker is doubly disadvantaged because he is considered eeeeeeeeeeeeeeevil due to his roles in the Reagan/ Bush 41 administrations, the First Gulf War, and the Florida Re-count. In the minds of true believers, there couldn't possibly be anthing that Baker could say that would be useful.
As Smith notes
(Baker's) program has the merit of being simple (at least in concept).
Unfortunately, now that the banking mess has become highly (as opposed to
somewhat) politicized, any new program has to fit within the confined of
soundbite-constrained communications if it is to have a hope of being
I was under the impression that the Dems - especially their Harvad Law president - were the nuanced geniuses who could deal with "complex" issues like this.
Of course, there is every indication that they are just fine with things as they stand. The endangered "super-banks" were a creation of the Clinton years. Their deposits, and the taxes on the massive salaries earned at the top, were and are crucial to funding the welfare state. They were also crucial in the effort to expand home ownership to those who couldn't afford a home except by fraud or government fiat. The bailouts are largely intended to save THAT, not the free market.