It's pretty bad when things are changing so fast you have to print your own bumper stickers -- or, perhaps, when liberals are so confused they can't figure out what they, collectively, want.
Okay -- not every liberal wants collectivization, but hell, sometimes it's just time.
There are two ways to break up companies said to be "too big to fail." One is to withhold bailout funds so as to force them into bankruptcy, the "let the free market sort things out" method. The other way is for government to wade in and do it. How?
Let's look at the government's options. One possibility, I suppose, is to bring anti-trust suits against the largest of the financial companies. Anti-trust suits, though, take years. We don't have years. Another possibility is for Congress to repeal the loathesome Gramm-Leach-Bliley Act and bring back something resembling Glass-Steagall. Then, presumably, megabanks like Citigroup would be obliged to break themselves up. Given the powerful obligations of members of Congress in both parties to the finance sector, that's not about to happen any time soon.
All that remains, as far as I can see, is nationalization -- government takes over the overbloated banks, wipes out the shareholders, slices, dices, and sells off the healthy assets for a fair price. The taxpayers still are stuck with the toxic assets, but at least it's not a total loss. Writing in the Times, though, former Fed governor Alan Blinder offers what he says is an alternative -- the "good bank, bad bank" solution, in which "the basic idea is to break each sick institution into two. The 'good bank' gets the good assets..." and "the 'bad bank' inherits the bad assets."
Huh? How does government break up the bank without first nationalizing it? And while it's clear that the taxpayers are stuck with the "bad bank," who gets the assets of the "good bank?" Surely not the shareholders -- that would be moral hazard of the worst kind.
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