Kevin G. Hall writes for McClatchy Newspapers:
If the plan doesn’t work, the next step might be nationalizing some banks, as some high-profile analysts have advocated, including former Treasury Secretary James Baker, pointing to Sweden’s successful exercise in the early 1990s.
Geithner rejects the parallel.
“We’re the United States of America. We are not Sweden,” he said, arguing that the U.S. financial system is much larger and more complex than any other and includes the world’s largest capital markets and many nonbank financial institutions.
Which may be the problem. Maybe the whole financial sector needs to be taken down a few pegs.
I’ve mentioned Thomas Geoghegan’s “Infinite Debt” article in the April issue of Harper’s a couple of times. Very simply, the financial sector and the financial services industry is eating America. Directly or indirectly, we’re all indebted to and working for the financial industry. We’re turning into sharecroppers, basically, except the “crop” is money.
In a balanced economy, the financial sector should support manufacturing and labor. Instead, the financial sector drains manufacturing and labor.
What we’re looking at here is capitalism hitting the rocks. Fifty years ago the world seemed locked in a giant struggle between capitalism and communism. Communism collapsed from the inside; it is not a sustainable economic system.
Now its capitalism’s turn. I am all for private ownership and entrepreneurship and all that, but if capitalism isn’t kept in check it will eat itself. That’s what we’re seeing; capitalism eating itself. The financial sector metastasized and is destroying the economic body.
On the up side, Binyamin Appelbaum and David Cho report for the Washington Post that
The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.
This suggests the Obama Administration hasn’t ruled out taking stronger measures. It would be good for the administration to declare right now that if the Geithner plan doesn’t do the job, receivership is the next step. That would be reassuring to me, at least.