Forget the Hype (& Fear): Barry O and Team Are Way Ahead of the Curve -- Bank Nationalization Even the GOP Can Love

Remember on Election night, when after so many years of Dem defeats, we couldn't believe that we finally had an intelligent, sophisticated, highly educated, and politically astute candidate, a New Model for the New Millennium, who could actually break on through to the Presidency? Until the last possible moment, we imagined that we could actually be saddled with a McCain-Palin Presidency which in our worst fears would be a George Bush Do-Over?

Well, in the opening weeks of the new Adminstration, as President Obama and his team struggled through what appeared to be political missteps of the Cabinet nomination process, and then the uncertainy around his efforts to achieve bi-partisanship on the Stimulus Bill, there was a little uncertainty, hedging, nervousness on the part of even Dyed-in-the-Wool-Obama- Supporters.

Now, despite the concern attendant upon the Heavy Lifting that the Stimulus Bill represents, and the public's acceptance that the Daschle resignation was unfortunate, but in keeping with President O's setting of the High Ethical Bar that hopefully will be a hallmark of his administration, the fog is beginning to set a bit, and we can still see a bit of sun on the Gloaming. A great example appeared in Financial Times, where all of the GOP nay-saying is revealed to be what it is, an effort at face-saving, and independence, where it can be maintained. But the reality is, Barry O, of Hawaii, Indonesia, NYC/Columbia U., Chicago, and Washington, DC, has some solid ideas that he is willing to push through. And when the pedal is to the metal, and someone says, look, guys, we've got to try this, even the Republicans will listen.

In this case, the nationalization of Banks, one of the huge No-no's in the American Canon for a long time, but which has been recommended as a key tool for getting the US back on a firm financial footing. Barry O is contemplating the "Swedish Model" as the best means to achieve this, and even the Grand Old Party may be beginning to listen:

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Bank nationalisation gains ground with Republicans
By Edward Luce and Krishna Guha

Published: February 17 2009 19:44 | Last updated: February 18 2009 01:07

Long regarded in the US as a folly of Europeans, nationalisation is gaining rapid acceptance among Washington opinion-formers – and not just with Alan Greenspan, former Federal Reserve chairman. Perhaps stranger still, many of those talking about nationalising banks are Republicans.

Lindsey Graham, the Republican senator for South Carolina, says that many of his colleagues, including John McCain, the defeated presidential candidate, agree with his view that nationalisation of some banks should be “on the table”.

Barack Obama, the president, who has tried to avoid panicking lawmakers and markets by entertaining the idea, has moved more towards what he calls the “Swedish model” – an approach backed strongly by Mr Graham. In the early 1990s Sweden nationalised its banking sector then auctioned banks having cleaned up balance sheets. “In limited circumstances the Swedish model makes sense for the US,” says Mr Graham.

Mr Obama last weekend made clear he was leaning more towards the Swedish model than to the piecemeal approach taken in Japan, which many would argue is the direction US public policy appears to be heading.

“They [the Japanese] sort of papered things over,” Mr Obama said. “They never really bit the bullet . . . and so you never got credit flowing the way it should have, and the bad assets in their system just corroded the economy for a long period of time.”

Administration officials acknowledge that the rescue plan unveiled by Tim Geithner, Treasury secretary, last week could result in the temporary nationalisation of some weak banks.

The plan sets out a framework for revealing the extent of the likely credit losses facing banks. Most private sector analysts believe the exercise will reveal that some banks have large capital shortfalls.

Policymakers acknowledge that if this is indeed the case, it will be difficult for those with the largest shortfalls to raise the required equity from the markets, in which case the government would probably have to take temporary control. Moreover, while nationalisation remains taboo in some political circles it is increasingly openly discussed among past and present economic policymakers of all leanings.

http://www.ft.com/cms/s/0/2ad3b750-fd27-11dd-a103-000077b07658.html?nclick_check=1