Nationalization is still opposed by many economists and financial market participants, while the White House has been vociferous in its devotion to private sector solutions. At some point soon, however, Professors Geithner, Bernanke, and the rest of the faculty will review the results of the stress tests now being taken by U.S. institutions.
Economist Michael Moeb, whose Moeb Services provides primary data to the Federal Reserve and GAO, warns that the federal government must avoid panic “at all costs.” Anyway, there “aren’t enough people at the OCC and the Fed to run these banks.” He proposes taking the too-big-to-fail banks and “lying down them gently. It’s like heart surgery. Their arteries are blocked. Split them apart, selling off some of this stuff—finally get them to a level of cost where they could do well.”
Other voices are less worried about nationalization. “I am skeptical of these arguments of the government’s impotence,” says Timothy A. Canova, professor of international economic law and associate dean at Chapman University School of Law. “Somehow Sweden, a country with little more than 8 million citizens, managed to nationalize its banks without crashing its currency and having a run on its financial system. There’s no reason to expect a run on 14,000 institutions.” As for staffing: “There’s a large number of private bankers and bank regulators who have lost their positions, and not just starting last October,” Canova notes. “The federal agencies could be and should be drawing on this huge pool of executive talent to start managing the zombie banks.”
