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An interesting claim I haven't seen before: nationalization of failing banks does not constitute socialism. Rather, it's the legal--and responsible--outcome un

An interesting claim I haven't seen before: nationalization of failing banks does not constitute socialism. Rather, it's the legal--and responsible--outcome under normal bankruptcy law.

colins_pride 18y ago
I'm not sure that the bankruptcy laws call for the nationalization of failing banks.
- gaius 18y ago
  IANAL, but a bank being taken into administration by the central bank is what should happen, rather than a huge injection of taxpayer's money. Having said that, if the taxpayer is going to do that and isn't getting equity (and wiping out existing shareholders, they knew the risks, yadda yadda) then something has gone badly wrong. The perfect bailout (assuming one was to happen anyway) would have been to refund everyone a year's income tax. The money would have gone into the banks via people's current accounts, and the rightful owners of that money, the taxpayer, would have maintained control of what's theirs.
  - anamax 18y ago
    > IANAL, but a bank being taken into administration by the central bank is what should happen, rather than a huge injection of taxpayer's money. Why are those the only two choices? Or rather, there are other things that one might do. Always beware someone who says that the only alternative to doing things their way is some disaster.
    - gaius 18y ago
      Choice a is what normally happens when a company is insolvent, choice b is what actually did happen.
      - anamax 18y ago
        Huh? The govt doesn't "normally" take over when a company is insolvent. Even with banks, the SOP until recently was shut-down (often via sale to another bank).
kubrick 18y ago
He's distorting the truth, though. What he says happened: we helped prop up banks when they needed it most. What actually happened: we gave banks money to prop them up, and they used to do things like buy out their competitors and give upper management new rounds of large bonuses.
mike_organon 18y ago
I agree with what he said about bankruptcy, but then he said banks should not go through that process, they should just be owned and run by the government, and he defended that position with nothing more than the standard "too big to fail" and calling it capitalism. Bankruptcy is a well-understood procedure, not calls to put random people in charge, even after admitting the government doesn't have anyone experienced to put in charge. Legislating this solution won't make it successful, which is why socialism and fascism don't work.
anamax 18y ago
> Rather, it's the legal--and responsible--outcome under normal bankruptcy law. What is the "legal and responsible outcome under normal bankruptcy law"? Nationalization of banks surely isn't and neither is socialism.
mjtokelly 18y ago
[in response to the previous three comments] Without arguing whether the government should have become a creditor to all banks (which I would disagree with), I understand his claim to be: the system fails if creditors do not take action to recoup their investments in failing institutions--and in this case the major creditor is the government.

An interesting claim I haven't seen before: nationalization of failing banks does not constitute socialism. Rather, it's the legal--and responsible--outcome under normal bankruptcy law.

colins_pride 18y ago

I'm not sure that the bankruptcy laws call for the nationalization of failing banks.

gaius 18y ago
IANAL, but a bank being taken into administration by the central bank is what should happen, rather than a huge injection of taxpayer's money. Having said that, if the taxpayer is going to do that and isn't getting equity (and wiping out existing shareholders, they knew the risks, yadda yadda) then something has gone badly wrong. The perfect bailout (assuming one was to happen anyway) would have been to refund everyone a year's income tax. The money would have gone into the banks via people's current accounts, and the rightful owners of that money, the taxpayer, would have maintained control of what's theirs.
- anamax 18y ago
  > IANAL, but a bank being taken into administration by the central bank is what should happen, rather than a huge injection of taxpayer's money. Why are those the only two choices? Or rather, there are other things that one might do. Always beware someone who says that the only alternative to doing things their way is some disaster.
  - gaius 18y ago
    Choice a is what normally happens when a company is insolvent, choice b is what actually did happen.
    - anamax 18y ago
      Huh? The govt doesn't "normally" take over when a company is insolvent. Even with banks, the SOP until recently was shut-down (often via sale to another bank).

kubrick 18y ago

He's distorting the truth, though. What he says happened: we helped prop up banks when they needed it most. What actually happened: we gave banks money to prop them up, and they used to do things like buy out their competitors and give upper management new rounds of large bonuses.

mike_organon 18y ago

I agree with what he said about bankruptcy, but then he said banks should not go through that process, they should just be owned and run by the government, and he defended that position with nothing more than the standard "too big to fail" and calling it capitalism. Bankruptcy is a well-understood procedure, not calls to put random people in charge, even after admitting the government doesn't have anyone experienced to put in charge. Legislating this solution won't make it successful, which is why socialism and fascism don't work.

anamax 18y ago

> Rather, it's the legal--and responsible--outcome under normal bankruptcy law. What is the "legal and responsible outcome under normal bankruptcy law"? Nationalization of banks surely isn't and neither is socialism.

mjtokelly 18y ago

[in response to the previous three comments] Without arguing whether the government should have become a creditor to all banks (which I would disagree with), I understand his claim to be: the system fails if creditors do not take action to recoup their investments in failing institutions--and in this case the major creditor is the government.