Are you concerned that trillions of our taxpayer dollars are going to bail out apparently insolvent “zombie banks,” with little accountability, upside to the public or financial stability to show for it?
Many of America’s most distinguished economists — including Nobel Laureates Joseph Stiglitz and Paul Krugman, and NYU professor Nouriel Roubini, who accurately forecasted the economic cataclysm we are now experiencing — contend that the zombie banks should be restructured (temporarily nationalized or put into receivership), and soon, or we’re headed for an even more severe and prolonged recession, akin to or perhaps worse than the “lost decade” suffered by Japan in the 1990s.
As prescribed, restructuring would last only for as long as it would be necessary to get the job done. It would, however, replace management at the bailed-out financial institutions whose reckless risk-taking wreaked havoc on a global scale. It would institute government control of the assets of the bailed-out companies, so that after the companies are restructured and their assets sold off, the proceeds would be returned to the taxpayers. It would also break up those financial behemoths we’ve been told are “too big to fail” and hence are too big to regulate, so that in the future no single entity could on its own imperil the financial system if it fails.
Instead of continuing to shovel good money after bad ($750 billion in TARP funds plus $2.2 trillion more from the Federal Reserve to undisclosed recipients, and counting), why not opt for restructuring, which economic experts advocate as the cheapest, safest, quickest and, in fact, most market-friendly path to stabilizing the financial system? Agreement on the necessity of restructuring zombie banks now spans the political spectrum as well, uniting Labor Secretary in the Clinton administration and current UC Berkeley professor Robert Reich, Senator Chris Dodd, Treasury Secretary in the Reagan administration and Secretary of State in the first Bush administration James Baker, and even former Federal Reserve chairman Alan Greenspan.
On the other hand, in response to PBS news anchor Jim Lehrer’s query about “nationalizing the banks” in a recent interview, Treasury Secretary Timothy Geithner indicated that “that’s the wrong strategy for the country, and I don’t think it’s a necessary strategy.”
Please contact President Obama to urge him to consider restructuring major banks that are insolvent, and not to reject restructuring as an option, as Secretary Geithner has done. In addition to the millions of jobs expected to be created as a result of the stimulus package, the success of President Obama’s own plan for economic recovery hinges on stability being restored to our badly shaken financial system. Many of the country’s best economic minds have concluded that that financial stabilization is unlikely without a decisive restructuring of the zombie banks. So have a number of former and current top government officials.
Please contact President Obama now. It’s no exaggeration if you tell him that our future hangs in the balance.
President Barack Obama
The White House
Link to online form
There is no big organizational muscle behind this effort. It’s just me and my keyboard, and the potential multiplicative force of your passing this appeal along to at least 10 people you know.
I’d appreciate your feedback, or even a note to say you contacted President Obama. Please leave your comments below or email me at <email@example.com>. Thank you for taking action!
Online sources for my post:
Joseph Stiglitz: “A Bank Bailout That Works,” The Nation
Paul Krugman: “The Big Dither,” The New York Times
Nouriel Roubini: “Fully Nationalizing Citi and Bank of America Would Be Better,” Tech Ticker (Video)
Thomas Hoenig, President of the Federal Reserve Bank of Kansas City: “Too Big Has Failed”
James Kwak: “Nationalization for Beginners,” The Baseline Scenario
The Big Picture’s list of heavy hitters for and against temporary bank nationalization
A little humor (such as it is) from Robert Kuttner: “White House Confidential,” Huffington Post