On Tue, 24 Mar 2009, Doug Henwood wrote:
>> The "Swedish Solution" is not being considered in this case by anyone
>> other than bloggers, *because it will not work*.
>
> What do you mean, "will not work"?
I think what "will not work" means in this post is can't be applied directly. Doing the Swedish solution here would be a normal FDIC nationalization, like we do every month. Citi and BofA can't be nationalized like that.
It would to be some other kind of nationalization, for which we don't have a pre-existing template. So if someone's for nationalization, they have to specify: what's your model for doing it? Because it can't be Sweden.
Offlist Daniel Davies suggested that the model for nationalizing the investment bank part of the US superconglomeraes could be Credit Lyonais in the 1990s.
We could argue about that. But offlist both he and Nomi (the best banking experts I have access to -- Krugman and Stiglitz don't answer my mail :) both agree with what I thought was this central point of that long post of mine: that whatever nationalization of Citi and BofA means, it can't follow the FDIC model.
Which I -- and most other people, including explicitly you and Krugman, I thought -- roughly equate with the Swedish model.
So saying the "Swedish solution won't work here" doesn't mean some other kind of nationalization can't work. It just means not that kind. And thus it begs the question: if you want nationalization, what's your plan? What's your model for doing it? What agency would be in charge, for example? Would the banks be broken up? How would you handle the investment bank parts? How would you handle the global conflict parts?
I think it follows that a nationalization model that actually applies to the situation is not going to be simple and straightforward like an FDIC one would be. It wouldn't be "no bullshit."
This also seems to entail that many of the touted virtues of nationalization -- simple, clear and pre-tested -- aren't really part of it.
It might still be the right thing to do. But what "it" is seems almost unspecified at this point.
Michael