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.