The reaction to good ideas generally passes through three phases.
In the first stage those who oppose the idea try to ignore it, hoping it will go away.
In the second stage the idea is perceived to be a serious threat to the status quo and so it is opposed, vigorously.
In the third stage those who previously oppoosed the idea declare that it was self-evidently right all along.
Nigel Lawson has called for the full nationalisation of the Royal Bank of Scotland this morning. Now I admit I did that in autumn 2008. It was self evidently right all along. The crowd have just taken a little while to catch up.
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Well, well, who would have thought it, one of Mrs Thatcher’s keenest supporters and fellow traveller on the neolibral right finally seeing sense? I’ve always thought that the answer to the Banking crisis should have been nationalisation. New Labour’s bailout simply let the bankers off the hook, and leaving the same people with the same culture in charge was never going to solve anything.
It’s simple really. Either the banking system can be left to fail, and this failure, under free market logic, is the price paid for excessive risk taking by private sector operators, or it can’t be left to fail because of the cost to the rest of the economy. But if banks can’t be left to fail, and whole point of the private sector is to reward risk taking where it succeeds and punish it where it fails, banking can’t be left to to the private sector. Therefore, it has to be done by the state. i.e banking is too important to be left to the bankers.
Nice to see a right winger finally acknowledge the truth of this argument. There’s hope yet?
Indeed, why not? Ma and Pa Taxpayer are going to have to pick up the the latest “speeding fine” incurred by their errant teenager “Banker” son.
http://www.cityam.com/latest-news/fresh-scandal-cost-banks-2bn
There is more rejoicing in heaven over one sinner who repents……
I have never seen any sensible argument against the nationalisation of the banks, nor have I been convinced by the argument that letting then fail would lead to disastrous consequences of the sort sometimes described: no money anywhere and mass disruption and starvation and such. Iceland did it, and the timeline included in the recent judgement in the ESA case about Deposit Guarantee Schemes in that country shows it is not difficult at all. Nobody should buy that argument
http://thosebigwords.forumcommunity.net/?t=51300641&p=373916850
One argument might be that in nationalising them we take on responsibility for their debts, the ones kept hidden in the shadow banking dimension. They’re infinite, they’ll destroy the banking system eventually and if we assume the responsibilities for that system they’ll destroy us too. We need new money now, we have to walk away from the old financial model completely.
No – they’re covered by limited liability
To the extent we would not be liable anyway
If they are admitted to be bankrupt (as they are) then they are wound up and the successor bank is not liable even to that limited extent . See the Icelandic situation. That seems to me to be the sensible way to go about it. Why do people persist in thinking that the debts must be paid no matter what?
According to a piece in the FT a few weeks ago, all the banks are actually under water. If we nationalised them all, couldn’t we eliminate all that £1tr+ of debt in one go?
The information Fiona has provided is interesting but could you imagine the current ConDem leaders carrying out such a decisive action – bearing in mind their incestuous relationship with the City?
I agree with you, Richard. The worthless shadow assets (liabilities), mainly mortgage backed securities, if not included as liabilities in the bank’s real business, could not subsequently be dumped upon the taxpayer, and in some ways this is the key to the problem.
If Scotland achieves independence perhaps we could hand RBS over to them (only joking!)
http://www.government.nl/news/2013/02/01/state-of-the-netherlands-nationalises-sns-reaal.html
Netherlands has nationalised SNS without letting them go bankrupt first and the result is not good. I suspect that if our own government “nationalised” RBS it would do it in the same way. It seems that this is because they do not really think nationalisation is a good idea and the aim is to get it back to the private sector ASAP, as is also the plan for ABN-Ambro.
The icelandic mechanism seems far preferable in every way, so far as I understand the comparison.