James K. Glassman: Corruption and Bank Nationalization

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glassman naf twn.jpgThis is a guest post by James K. Glassman, former Chairman of Public Broadcasting and former Under Secretary of State for Public Diplomacy. Glassman was also editor of Roll Call and was founding editor of The American, and is now president of the World Growth Institute.
This piece first ran in The American earlier today. Glassman’s views are his own, but whether one agrees with him on the results likely with bank nationalization, his thoughts below are worth a read.
Steve Clemons agrees that the risks of serious moral hazard and corruption are quite high with the level of public sector money runnning into private sector hands, but there may be little choice at this point. Clemons also believes that there is an undeveloped debate yet to be had about the manner and template of re-aligning the interests of private sector multinationals with the interests of taxpayers if they are taking bailout money. This realignment has to happen, but at the same time, there are serious downside probabilities about the very performance of these firms.

Remember the House Bank
Banks that are owned by governments will be run to benefit politicians.
As the federal government moves closer to nationalizing more of America’s largest financial institutions, including Citigroup, it’s time to recall the history of federal ownership of commercial banks.
Certainly, the record of the Second Bank of the United States (1816-41) should give us pause. The bank was 80 percent privately owned but effectively controlled by the president and Congress. It was riddled with fraud and corruption and eventually went bankrupt.
The most recent admonitory example is the House Bank. I know it well. In September 1991, when I was editor of the newspaper Roll Call, our reporter Timothy Burger, now at Bloomberg News, broke the story that led to the exposure by the Ethics Committee of 269 House members who had abused the bank with significant overdrafts. In the end, many of them, including Rep. Stephen Solarz of New York, were defeated in 1992 re-election bids.
It is not difficult to imagine the argument that, if taxpayers own a bank, its branches should serve all Americans and not be concentrated in certain states or neighborhoods.
“The House Bank,” said a Sept. 19, 1991, report by the General Accounting Office, “is a private bank subject only to regulations established by the House of Representatives.”
The House ran its own bank in a way that resulted, in six months alone, in 4,325 overdrafts–an annualized average of 20 per House member. Some 134 members (about one-third of the House) kited a total of 581 checks amounting to $1,000 or more each–again in just six months.
If this sounds like an inappropriate comparison, it is not. Banks that are owned by governments will, very naturally, be run to benefit the politicians who serve as agents for the taxpayer-owners and who directly provide the funding and the oversight.
In the case of a nationalized bank, perhaps the politicians will not benefit personally, as they did with the House Bank–although, based on the track record of recent years, we can expect some chicanery of that sort. The main concern, however, is that the banks will be subject to management by political objective.
Even under current circumstances, where the U.S. government is the largest shareholder in several large banks but owns less than 10 percent of the stock, those banks are now subject to federal laws that prescribe how their managers are to be compensated.
The federal government now owns more than 75 percent of AIG, the giant insurer, and industry executives say that politically inspired limitations on AIG’s conferences (which the company uses both as incentives to its own sales people and to drum up more business from key customers) are hurting businesses. The company has cancelled 160 such conferences this year.
It is not difficult to imagine the argument that, if taxpayers own a bank, its branches should serve all Americans and not be concentrated in certain states or neighborhoods. Or that the bank should have properly diversified employees and suppliers. Or that it should lend broadly and democratically. Or that it must not “overcharge” consumers on credit cards.
Certainly, all of these political pressures on financial institutions already exist, but one can imagine them being sharply intensified with government ownership. Devising the right policy to deal with banks whose losses have brought them to the brink of insolvency is no doubt difficult.
But before rushing to nationalize, Americans should recall the experience of the House Bank–an institution with only $1.5 million in assets. Imagine the temptation of running banks with assets in the trillions.
— James K. Glassman

Comments

51 comments on “James K. Glassman: Corruption and Bank Nationalization

  1. Jon M Gallagher says:

    As has been pointed out repeatedly, someone who is so completely out of touch with reality as to write “Dow 36,0000” now presumes to lecture us about how the House couldn’t run a credit union, which actually ran more like an old style British Bank, allowing overdrafts as informal loans.
    What is the differenc, except in degree, from some like Glassman and any other ten global climate change deniers, or other well-dressed, well-bred, well-educated (Sidwell Friends, Harvard!), white, lunatic?
    Mr. Clemons, give us real diversity in informed opinions. Ignorant ranting I can get for the price of 40 oz can of Malt Liquor.

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  2. Mr.Murder says:

    Diebold performs most bank transactions.
    Diebold performs most voting transactions.
    The charade of democracy must be imposed, with great blooshed and profit margins.

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  3. söve says:

    The error is this pernicious and nefarious predator class calculus is imaging all the people are dim sheep, ignorant, pliant, and obedient. The predator class is woefully mistaken. There will be blood, and a reckoning and a balancing. Predator class heads will roll.

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  4. rapier says:

    Is this the same Glassman of DOW 36,000 fame? That was a political ideological statement dressed up as economic analysis/resume. In other words it was an exercise in bad faith. Like most in the public sphere he is a compromised. He is a con man, a shill. He believes what he is paid to believe. Or he is paid to believe what he says and perhaps does believe.
    You can puzzle it out six ways to Sunday but only a fool would take what he says at face value. It will be curious to see who he throws under the bus as the financial world continues to implode. This Obama government thing is not going to work with the majority of people. It might work with just enough nuts with guns and truck bombs, if you get my drift.
    I will admit. Don’t get me wrong, the Obama response so far has been a disaster of monumental proportion but he did not make this mess. Glassman did. With his dishonest analysis of what stocks are. Stocks are the ugly stepchild of capitalism. Bonds are the foundation. DOW 36,000 was one piece of the mighty propoganda mountain which is now destroying the ‘savings’ of millions of Americans. Just like real estate ‘investment’ was going to make so many wealthy.
    When it come to corruption you can’t top James Glassman. His use of the word nationalization is corrupt too. Old dogs don’t change their spots.

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  5. TonyForesta says:

    The most critical issue in the Obama administrations bowing, cowtowing, and funnelling trillions of the peoples dollars into the off shore accounts of the sharks, swindlers, and predator class cronies and oligarchs on Wall Street, – is that it will not work. The sharks, swindlers, and predator class cronies and oligarchs whose crimes, fraudulence, malfeasance and perfidy are simply ignore my the Obama government just as they were advanced by the bushgov, continue on their merry way, pimping and bruting irredeemable debt products and proselytizing the fraudulent and bandit capitalist fiction that the people need to assume more debt, and spend more money don’t have to allay and stabilize the financial markets. Absolutely NOTHING will change! The next bubble will be conjured in the oppulent board rooms and lear jets of the predator class, who alone and exclusviely will profit wantonly and obscenely from the fraudulent ponzi schemes and bubble economy they concoct, only to be bailedout again by a compliant and obedient keptrocracy masking itself as the American government.
    Crimes have been committed. Fraud on an epic scale. The greatest and largest swindles and thefts in earths history have been prosecuted and successfully immunized or escaped.
    FAILED institutions, piloted by FAILED management, bruting and pimping FAILED models must FAIL. There is no escaping this terrible truth. Immunizing, or shielding or godforbid advancing or bailing our FAILED institutions, FAILED management, bruting and pimping FAILED models is are recipe for disaster, and the certain total collapse of the financial system and America as we knew. I cannot imagine the predator class having any other goal. The predator class who reign all powerful controlling 90% of America’s wealth and resources are actively seeking the total destruction of America and the global financial system. After all the blood is shed, after all the rockets red glare and bombs burstin in air, the predator class alone will stand Olympian, hypersuperior and dominant.
    The error is this pernicious and nefarious predator class calculus is imaging all the people are dim sheep, ignorant, pliant, and obedient. The predator class is woefully mistaken. There will be blood, and a reckoning and a balancing. Predator class heads will roll.

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  6. samg says:

    the house bank scandal was much ado about very little. all our bank scandals should be so insignificant. and by the way, mr. glassman, let me remind your readers that with the dow now at about 7,000 it has a mere 29,000 to go before it gets to where you once predicted it would be. remember Dow 36,000? why should anyone believe anything you say about anything?

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  7. questions says:

    Jan/Feb deadtree Multinational Monitor has a really nice explanation of how Wall Street did it all in ten easy steps. It’s really depressing.

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  8. Steven Clemons says:

    Quite an interesting roster of comments, which started out with one
    by Spunkmeyer — a friend whose identity I will keep concealed.
    But I do want to say that Mrs. Spunkmeyer made for me last night
    the very best flan I’ve had in my life along with some empanaditas
    which I have never had until last night in my life.
    So thanks to both Spunkmeyers and their pup, Pancho.
    — Steve

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  9. rich says:

    Franklin,
    Agreed on all points–the red herring was what set me off, and I think I covered that. At minimum, Glassman is off-point and doesn’t address what’s proposed, nor the problem at hand.
    I did make a broad and inexact comparison between rrelationships in the wider institutional landscape when the House Bank was operating versus those in the free-for-all that brought us to this sorry pass … too sweeping, and also off-point, but still relevant I think.
    As you say, obviously the Congressfolk wouldn’t be running anything. But the broader interlocking relationships were my basis of comparison. Would we rather have a few check-kiting Congressmen, a functional regulatory framework and a vibrant economy? Or politicians owned by corporate contributors, deregulated & distorted markets riven by profiteering and massive corruption, and an economy in the toilet? Hmm, jobs or toilet? Regulation or disaster? Doesn’t take a genius to do what’s best for the country.

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  10. arthurdecco says:

    “Glassman wrote a book about the markets that has been
    ridiculed, but he’s a serious thinker.” Steve Clemons
    Do we have to take your word for it, Mr. Clemons, or can you post a link to some of his published “serious” thinking? I for one, would like to read some of his serious thinking for myself because there is nothing in what you’ve published here that is remotely “serious”, if by that you mean insightful, original, honest or intelligent.
    I’m afraid rich nailed it in his tour de force post above. rich peremptorily cut the legs out from under any defense of this man, yours included, with the enemy of hyperbole – cold hard facts. Lot’s of them.
    “….and whether some of you like it or not,
    I always enjoy debating Jim Glassman and hearing him out
    because he’s an ideas entrepreneur in DC. Like me in fact.” Steve Clemons
    From my limited exposure to Mr. Glassman’s “ideas”, I wouldn’t categorize him as an “ideas entrepreneur” as much as I’d describe him as a “Bullshit Artist”, your identification of him as a fellow traveler notwithstanding. In my opinion, you’re belittling your own thinking when you type, “Like me in fact”. You have proven to me time and again that you understand respect and subtlety even on those issues where I’ve found myself passionately disagreeing with your opinion or approach.
    Mr. Glassman’s writing here is as subtle as an IMAX image of a frail old woman crushed under the wheels of a careening dump truck close enough to leave her blood splashed on your face. And about as committed to truth-telling as the rest of your American oligarchs and their dependable and dependent whores are.
    From where I’m sitting it looks like you’ve embarrassed yourself with your support of this man with many of the people I believe you respect on this blog.
    I’d like to know why a smart and careful guy like you allowed that to happen…

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  11. Franklin says:

    Well said, Dan Kervick.
    Rich, I applaud the idea of finding consensus. However, in the case of Glassman’s invocation of the House Bank, my main issue is that he is deploying a logical fallacy — a red herring. The House Bank may illustrate a point about the Congress overseeing a small enterprise that benefits members of Congress. We’re not dealing with that issue.
    The core question is: How do we deal with banks that are effectively insolvent — and more accurately LARGE banks that are insolvent?
    We already have a formal process for dealing with banks that are FDIC insured, which go belly-up, but it’s a much bigger issue in dealing with massive financial institutions that are “too big to fail” — which under normal circumstances would be going the way of Lehmans.
    Glassman doesn’t provide any real solution to the core issue. His red herring argument dodges the core question.
    I have mixed feelings about the approach that was put into place with Citi. I think there’s some merit in having private preferred shareholders convert a portion of their holdings into common stock in tandem with the Federal holding conversion, so that some of the larger private shareholders now have some skin in the game. In the near term though, I have my doubts that the approach will provide the bank with sufficient liquidity to weather the current down-turn — leaving the issue of insolvent banks on the table and unresolved. More aggressive measures will probably still be needed.
    As far as politicians running insolvent financial institutions — technically it would be civil servants handling the matter with oversight from elected officials. The day to day business would still be handled by private employees. The goal should be to remove tax-payer exposure at the earliest possible time. No easy solutions.

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  12. JohnH says:

    I agree with Wigwag that we do need to separate the banks that have learnt their lesson from those whose cultural is dysfunctional. One of the problems with many huge finance institutions was that they were led by salesmen.
    So, I would propose the following additional items for the stress test:
    1) Put a guy in charge whose specialty is credit. Those who insist on keeping sales guys as CEO should be deemed culturally dysfuntional.
    2) Evaluate bonuses. Those banks who give humongous bonuses as a reward disastrous results should be deemed culturally dysfunctional.
    3) Assume that any bank that assumed a priori that it was too big to fail, should automatically become a target for breakup into little banklings.
    4) Ditto for those banks who successfully lobbied and got relaxation of capital adequacy requirements, so that they could intentionally engage in rash behavior.

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  13. eCAHNomics says:

    Well, one thing a govt owned bank WON’T do is financial engineering that creates toxic assets.
    And I can’t imagine Dow36000 guy is still around. Think he should creep into a spider hole somewhere. If he’d been Dow3600 guy, we’d be listening.

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  14. Arun says:

    The F.D.I.C. regularly takes over banks (isn’t that nationalization) and I don’t see anyone complaining of corruption.
    Why should it be difficult to handle AIG, Citicorp etc., in the same professional, apolitical way?

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  15. ... says:

    wigwag quote “I don’t own any bank stocks but my pension fund might (I haven’t checked)”
    basic knowledge for any person unfamiliar with financial markets – if you have a pension fund, almost without any exception, the fund will be holding bank and insurance company stocks… these folks work very hard together to prop one another up and pension funds are a part of the game to ensure that the house of cards remains erect… if anyone here thinks it works differently, i would be very curious to hear from them… thanks –

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  16. rich says:

    We don’t have to “view every bank in the same manner,” and don’t. At the same time, circumscribing the issue to one bank or one type of corporation is equally in error.
    More banks than Citibank are insolvent. WaMu and many smaller banks don’t get the same attention. Bank of America DID make a grievous error in judgment, whatever its previous financial condition: swallowing up other companies ‘just because’ is foolhardy. They also need to pay a price. Beyond banks, Merrill Lynch and Countryside are guilty not only of stupendously dumb behavior, but of rapacious nad fraudulent practices. There is criminal liability in play, and operating (Thain) or purchasing (Ken of BoA) such businesses without actually knowing how they worked, what they sold, or what they were worth .. . is an indictment in and of itself.
    I disagree there is anything reasonable or reality-based about the gambit that “Where the government helped cause the problem, it is only fair for the government to bear a greater burden in finding a solution.” Unmitigated Nonsense. Who threw off the due regulatory responsibilities for their greedhead pals? Scapegoating the govt for the sins of ideological greedheads who caused this mess is anathema to justice, common sense, rational behavior–and functional markets.

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  17. Kathleen G says:

    “Our economy is being nationalized faster than you can say Hugo Chavez”

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  18. WigWag says:

    JohnH, says,
    “The sheer incompetence of the bankers is so monumental that it’s hard to imagine any government exceeding it, even if it put it’s mind to it. (Not that the Bush administration, given another 4 years, wouldn’t have tried!)”
    I think you’re partially right but paint with too broad a brush. The bank that’s most ailing right now is Citibank. They have no one to blame but themselves for the fix they find themselves in. But to be fair, the current CEO (Pandit) has been on the job only for about 18 months and he inherited most of Citi’s problems.
    The other large bank that’s in serious trouble is Bank of America, but the management there is far less culpable than the management at Citibank. In fact, Treasury and the Fed are at least as much to blame as Bank of America’s management is.
    The Bank of America made its first mistake when they purchased Countrywide Financial. The move was widely criticized at the time. At first the critics were surprised when the move turned out to be profitable but as the mortgage crisis expanded it became clear that the purchase did much more harm to Bank of Americas balance sheet than good.
    But even given the purchase of Countrywide, Bank of America would have remained a strong, well capitalized bank.
    Bank of America’s downfall came with its purchase of Merrill Lynch. This mistake can be blamed on the Bush Administration as much as it can be blamed on Bank of America CEO, Ken Lewis.
    The Bush Administration, Hank Paulson and Chairman Bernake begged Bank of America to purchase Merrill Lynch and they promised whatever aid would be required. Lehman Brothers had collapsed, AIG was in extremis and Treasury and the Fed were frantically trying to prevent bank failures of monumental proportions. They encouraged Bank of America to rush to purchase Merrill before the Bank had the opportunity to do its full due diligence. The governments stance was, “make the deal now; we’ll deal with the consequences later.” Well the chickens have come home to roost. To make matters worse, based on preliminary evidence, there is some reason to believe that Merrill defrauded Bank of America. Merrill’s loses in the quarter before the deal closed were dramatically higher than Bank of America expected.
    My only point is that it makes little sense to view every bank in the same manner. Some bank managers are fully to blame for the bad condition their banks are in; some are less culpable.
    A one size fits all solution may not be called for. Where the government helped cause the problem, it is only fair for the government to bear a greater burden in finding (and funding) a solution.

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  19. Cee says:

    http://www.independent.co.uk/news/world/americas/the-stanford-files-fbi8217s-first-probe-was-20-years-ago-1628938.html
    More than 20 years ago, the authorities repeatedly probed Allen Stanford’s alleged links to some of the world’s biggest and most powerful drug lords. Despite no fewer than five investigations into suspected drug money laundering by law enforcers ranging from Scotland Yard to the FBI, no charges were ever brought.
    As banking officials in Central and South America and in the Caribbean moved quickly to freeze accounts linked to Stanford, the full extent of suspicions surrounding his business dealings emerged. Last night, the England and Wales Cricket Board was under growing pressure over its decision to enter into a £50m deal for Stanford’s businesses to sponsor Twenty20 tournaments. The ECB refused to say what detailed steps it took to find out whom it was dealing with before agreeing the deal.
    The 58-year-old businessman, whose personal fortune was estimated at $2.2bn last year, headed a global financial group which claimed to have $51bn worth of assets under management. But he is now under investigation by a range of US criminal and regulatory authorities, including the FBI, the Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS) and state financial regulators.

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  20. questions says:

    JohnH,
    There’s something more worrisome in my mind which is that maybe the bankers and other money people were perfectly competent and perfectly rational given their situation. In this case, the entire structure of our money system demands precisely the behavior they displayed. If this is the case, the level of systematic change required is mind-boggling. Way more than a bit of regulation here and there….

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  21. JohnH says:

    After reflecting on this overnight, I couldn’t decide which was more laughable: Glassman’s critique or Steve’s defense.
    If this all an “ideas entrepreneur” entrepreneur can come up with, then the conservative movement is truly bankrupt intellectually or well as morally. Far from a being new idea, the meme of governments not running businesses well is one of a handful of standard, worn-out GOP talking points.
    But the part that is really mind boggling is that Glassman is suggesting that nationalization would be worse that the bankers’ own management, which didn’t merely bankrupt the banks, but drove the entire economy over the cliff. The sheer incompetence of the bankers is so monumental that it’s hard to imagine any government exceeding it, even if it put it’s mind to it. (Not that the Bush administration, given another 4 years, wouldn’t have tried!)

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  22. Cee says:

    The number of souls lining up for a cup of coffee and a baloney sandwich is twice as long as it used to be.
    Check food insecurity in your states
    feedingamerica.org
    The people who create these bread lines should be in jail. Until someone starts to hold them accountable like Elliot Spitzer planned to nothing will change
    Check http://www.globalresearch.ca/articles/HUD403A.html
    MH: Offshore tax havens enable multinational companies to give an impression that they do not earn any income on business done in countries where taxes are levied at European and North American rates. The reality is that U.S. companies make a lot more money than they report. However, offshore banking centers free them from having to pay taxes on this income, or on capital gains. That’s why we’re running such high budget deficits today.
    SS: I understand you have had a forty-year experience with these offshore banking centers and tax-free enclaves.
    MH: I was taught the ropes in the course of my work as a balance-of-payments economist, and later as a mutual-fund manager. My first clue to how these enclaves were set up came when I worked for the Chase Manhattan Bank in 1965-66 and was assigned the task of writing a report on the oil industry’s impact on the U.S balance of payments.

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  23. erichwwk says:

    “Banks that are owned by governments will be run to benefit politicians.”
    “Banks run by rich and greedy private managers will be run to benefit rich and greedy managers”
    Do we see a pattern here?
    What pray tell is the difference between an organization run by a few politicians and an organization run by a few businessmen? Do the same people act differently under a business monopoly than under a government monopoly? Is it the word we chose to call the institution that matters, or how the decision making process and social contract is structured?
    If one has bet on a horse at the track, is one entitled to cash in on the basis of one’s horse being a bit ahead, coming out of the gate? To move those winnings to Switzerland or the Cayman Islands before the race is over? If one’s horse trips and falls, and another horse crosses the finish line first, how are we to address the contract to pay the actual winners? Are we to pass the hat for funds with which to pay the winner or do we seek the return of unrealized earnings?
    I have never in my life seen such cowardly and selfish attempts to justify theft. The bank bailouts have become the financial mushroom cloud, holding hostage the invaluable rights to the common property institution of money unless the rich receive what appears to be their monthly extortion payments.
    Moral hazard? You bet!!! The concept of two big to fail has replaced too big too jail, and social benefits for the rich and private costs for the poor everyone else. They get the mine and we get the shaft. What a two tiered system of property rights.

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  24. John Burke says:

    Glassman makes a lame “straw man” argument here about the nature of the reorganization process. The real process has been discussed everywhere — even the House of Cramer:
    http://www.cnbc.com/id/29362429

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  25. questions says:

    WigWag,
    Of course there’s huge suffering over the downturn. Of course many people now need free coffee and sandwiches, many are skipping or skimping on prescription drugs, many will lose the few small pleasures they have left. But the solution to this problem is more complex than simply not nationalizing banks. The underlying issue is that the bank stocks were never *worth* what their peak price was. “Worth” is a funny term since it connotes some kind of underlying reality that I’m guessing is always fictional, so really there is no there there, no worth at all. But at any rate, even in Fictionland, the stocks weren’t backed up by actual earnings. The earnings and the boom were as fictional as the value of the CDOs they were based on.
    Coming down from a boom like this is not going to be easy. The orchestra never really had the money to subsidize those seats or pay their musicians; builders couldn’t really charge what they did because no one really had the money to pay. As we move back down the ladder to prices and values that have at least some vague relationship to something like reality, we will feel endless dislocations. If drug prices stay high, people will do without drugs and they will die sooner and feel sicker in the process. If housing prices stay high enough, people will go homeless. If food prices stay high, people will go hungry or even starve. Inelastic demands will become more elastic than we thought possible (thing Slumdog Millionaire).
    We can’t re-inflate the bubble because it will just burst again and again. The banks really don’t have enough worth to sustain either dividend payments or rising stock prices.
    What I think needs to be processed in all of this is that wealth wasn’t lost so much as it never existed in the first place. Yes we did fun things and bought cute crap and ate out and consumed, but the wealth that supported this behavior wasn’t real. We’re waking up from a long and foolish frolic of a dream.

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  26. TonyForesta says:

    Many outstanding commentaries here. Obviously we all welcome Mr. Glassmans post and respect his opinions. Many of us simply disagree. We offer counters and wait for reply. That is what debate is all about.
    With regard the nationalizing banks, let review a little recent history. In October and early November of 2008, four or five short months the likes, of McCain, Paulson, Bernaki and the Wall Street titans and predator class pundits were intentionally DECIEVING the American people prosyletizing and bruting naked LIES like the fundamentals of the economy are sound, and markets will correct naturally, and the bottom hast been hit, and this economic crisis is simply a natural market cycle. All of these lies pimped and bruted by all of these liars have been proven FALSE!
    The total exposure to the socalled “toxic assets” far exceeds the total capital of all the banks on earth. Trillions of dollars of ponzi scheme paper wealth must, will, and is being unwound. It’s gone. Now the question arizes and – this marks the critical divide separating conservative and liberal, gop and DNC, the bushgov and Obama government – how is that pain, that monsterous loss of wealth to be distributed? Conservative’s the gop, and the bushgov seek, and work like banshees to heap all the debt, the deficits, the burdens, the pain, the suffering, the imponderable costs on the shoulders of poor and middle class taxpayers and our children. The superrich, the predator class who are the single group culpable for conjuring these ponzi schemes, and the only group to benefit wantonly from these ponzi schemes, the concoction irredeemable debt products, packaged and repackaged and repackaged and resold globally – are in the conservative, gop and bushgov eyes to big to fail, immune, supremist, untouchable, Olympian, and deserving of all the ill-gotten booty funnelled into off shore accounts because they are superrich, the predator class, and godwillsit. Amen.
    Liberals, the DNC, and the Obama government seek and are working like banshee’s to see this paiin suffering, imponderable debts, deficits, and costs shared more equitably. Granted, certain elements of theleft, and count me in this group – want to sharpen our pitchforks and seek a real horrorshow retribution for the fiends and sharks on Wall Street who are responsible for this greatest economic collapse since the depression. Others, like the Obama government are more conciliatory and are working in ways to distribute the pain and the terrible costs more equitably.
    FAILED predator class management of FAILED predator class institutions bruting FAILED models that only benefited the predator class FAILED CATASROPHICALLY. The world is facing unprecedented pain, suffering, and uncertainty because of the financial malfeasance, perfidy and incompetence of FAILED management, of FAILED institutions pimping FAILED models. These FAILURES should be removed from the system. All the management of FAILED banks and financial institutions must be terminated. Some of them could and should be prosecuted for crimes! FAILED banks and financial institutions, that are insolvent because of their FAILED management, and FAILED models must be siezed, nationalized, and disolved orderly. Predator class share holders and bond holders who benefited exclusively and wantonly from the FAILED managements, FAILED institutions, and FAILED models should and must take a significant haircut. Share holders and bond holders will loose significant wealth. That is the way free markets work. Of course if the predator class is actually willing to come out in public and defend “crony capitalist”, or “casino capitalists”, “bandit capitalist” markets and machinations, – then they can claim some Olympian supremist reason or proclamation that would immunize the predator class from suffering any serious losses, or significant values or holding, or right. If not, if we are a nation that honors and abides by the rule of law, – the FAILED managers, of FAILED institutions, who bruted and pimped FAILED models, – must FAIL!! Predator class shareholders and bondholders must take a significant hair cut, and the imponderable costs, deficits and debts, and terrible pain of the most catastrophic economic crisis since the depression must be shared equitably.

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  27. WigWag says:

    “Let’s not overlook the elephant in the room shall we? *One* of the concerns about bank nationalization comes from the people who own shares in these banks, and are at risk of being wiped out. Perhaps everyone who owns bank stock should raise their hands so all the cards are on the table.”
    I don’t any bank stocks but my pension fund might (I haven’t checked). I also own a few mutual funds, mostly value oriented. I couldn’t really say whether or not they own any bank shares.
    The endowment fund of the college that my grandchild goes to probably does.
    I have lots of elderly neighbors who rely on income from their IRAs and 401Ks to pay their rent, buy their medicine and maybe even go out to Jai-Alai every now and then. I’m quite sure that some of the mutual funds their retirement savings are invested in probably own some bank shares.
    My neighbors and I like to go see Michael Tilson Thomas when he conducts the New World Symphony Orchestra in Miami Beach now and again (we recently saw a Stravinsky and Ravel program). We can only afford the cheap seats. I have a suspicion that the Orchestra subsidizes these seats through funds they have invested; the Symphony might own some bank shares. And I know the orchestra can’t survive on ticket sales so they do alot of fundraising. The people who used to donate money but can’t afford to anymore might have owned some banks stocks once.
    The funny thing is that even though the stock market has plummeted, the rich folks sitting up in the expensive seats still look like their doing just fine; they’re not happy and they may be cutting back, but the change in their life styles doesn’t seem that major. But since the stock market plunged many of my friends have had to make major changes; none of them good. Trust me; change is not that easy when you’re in your 80s. If you don’t believe it, wait and see. And by the way, it’s not just banks stocks coming down. Ever since the banks stocks began to fall, interest rates on banks accounts and CDs have gotten awfully low. That’s not good when you depend on that interest to pay the bills.
    One last thing. When I’m well enough I volunteer to make sandwiches at the local Catholic Worker House. We give out the sandwiches on the coffee line every Tuesday, Thursday and Saturday (rain or shine). The number of souls lining up for a cup of coffee and a baloney sandwich is twice as long as it used to be. Many mornings we have 100 or more people lined up. I don’t know how many of them used to own banks stocks, but I do know one thing; the number of people lining up for a free cup of coffee has been going straight up since bank stocks have been going straight down.
    Maybe it’s just a coincidence.

    Reply

  28. Dan Kervick says:

    “Glassman has a point. Would everyone around here be so anxious to nationalize the banks if McCain had won and Phil Gramm was Secretary of the Treasury?”
    Glassman may have a good point to make. But saying the government shouldn’t take a bank into receivership because of what happened with the House Bank is like saying that the government shouldn’t run the post office because some congresspersons have sometimes abused their franking privileges; or that the government shouldn’t run the armed forces because some pols once took some free rides on military helicopters.
    Of course Glassman is a libertarian, so he may not like the government running post offices, or doing much of anything for that matter. But how many would follow him? Glassman starts with the cynical libertarian axiom that “banks that are owned by governments will be run to benefit politicians.” I think we should all have a healthy skepticism about the potential for corruption and mismanagement in government business. But we’re quite lost as self-governing democratic polity if we begin with the assumption that we the people can’t do *anything* right through the instrumentality of government.
    Let’s not overlook the elephant in the room shall we? *One* of the concerns about bank nationalization comes from the people who own shares in these banks, and are at risk of being wiped out. Perhaps everyone who owns bank stock should raise their hands so all the cards are on the table.

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  29. JohnH says:

    “Banks that are owned by governments will, very naturally, be run to benefit the politicians who serve as agents for the taxpayer-owners and who directly provide the funding and the oversight.”
    The ideological core here is whether the politicians run the banks will run them for themselves (corrupt), as agents for [wealthy] taxpayer-owners (Republican crony capitalism), or as agents for the common good, like a utility. It’s clear how Republicans would run them. But it’s not clear how Democrats will sort out on this. While Democrats have more of a bent toward good government, effective government (because they don’t hate government), they also have strains of corruption and crony capitalism.
    You can do a knee-jerk, ideological dismissal of government for its inability to run large, efficient organizations, if you want. But the picture is far more complicated than these sweeping generalities. Social Security is very efficient and the VA apparently runs well, too. Meanwhile the DOD is notoriously incompetent at financial management, but people want to keep throwing money at it anyway. Then there are those icons of private industry–the auto industry, the healthcare industry, and the finance industry, all of whom have really screwed things up.
    While I agree with those who say that government often doesn’t run firms well, you have to admit that private industry often hasn’t done such a bang up job, either. Right now, it looks to me like all of these industries–auto, healthcare, and banking–need to have an outsider step in to force the changes that they are culturally and structurally unable to accomplish for themselves, kind of like the IMF stepping in to straighten out bankrupt nations.
    Ultimately, if not the government, then who will do the job that obviously needs to be done?

    Reply

  30. rich says:

    I’m glad Glassman posted here and don’t think anyone objected to the process here at TWN. Again, always heard good things bout him.
    I’m a big cultivator of ideas from all quarters, and testing my own ideas and finding points of agreement with presumed opponents, and driving exchanges until common ground emerges is something I love to do.
    Everyone already agrees with Glassman’s nominal point, recapped by Steve, “that politicians don’t run firms well.
    The concern is that Glassman appears to be talking past Obama’s proposed solutions and past the reality of our crisis, and Steve Clemons is talking past his interlocutors.
    It’s an error to assert the complaints registered upthread are politically motivated, that if DeLay or McCain would be nationalizing banks (never happen) we’d reverse course and object. That’s nonsense. We’ve gotta get a handle on this problem, and the substantive point as Geithner and Krugman noted is that banks go into receivership all the time. At minimum we deserve an equity stake for propping these banks up, and using this private sector mechanism to stabilize & clean up banks before reselling that stake is hardly vulnerable to Glassman’s oddly behind-the-curve admonishment.
    In fact, his purpose seems to be to prop up the disinformation that ‘nationalization’ is a horror, or that government-run banks is being proposed, or that there’s something to fear. Enabling that default demagoguing is objectionable. Glassman’s point may be made sincerely and soberly, but it’s clearly ideological maintenance. Here’s why:
    Let’s do a little cost-benefit analysis. Every Repub & every capitalist should be able to accept this. Who performed better — Congress, we had regulatory frameworks and the economy when Congress ran House Bank? Or now, when big money owns Congressmen, we have no functional regulatory framework, and the economy tanked?
    Any honest fiscal assessment shows we had more public integrity, less corruption and were far better off with check-kiting Congressmen running the till. Let’s compare: for the sake of argument, let’s roughly double the number of
    Congressmen involved from 269 to 535. Let’s further double the total checks kited from $1,000 to $2,000. Call it a yearly per diem. per annum. Say it’s for office expenses–I want our humble servants to have the resources they need to do an effective job, but let’s give it hard ceiling.
    That’d be $1,070,000/year — and for far less, the House Bank supported politcal oversight of regulatory frameworks resulting in a robust economy that was the envy of the world, worth trillions.
    That far outperforms the alternative model: big money bought Congressmen, who don’t provide oversight. Corporations colonized regulatory bodies designed to oversee their activities. Abramoff/ DeLay/ & Cunningham’s fraud was massive and systemic. The result: a tanked economy entering a second great depression, with anywhere between $3 or $12 or $25 trillion just gone.
    Purely on a cost-benefit basis, rational consumers would pick the House Bank, minor infractions and a healthy economy.
    Glassman is talking postage stamps, here. But the outrage is the hundreds of billions that’s bought .. . nothing. That’s what prompted the upthred uproar.
    However, Glassman made a legitimate point:
    “Banks that are owned by governments will, very naturally, be run to benefit the politicians who serve as agents for the taxpayer-owners and who directly provide the funding and the oversight.”
    No one disagrees. But the model we’ve experienced is far more dangerous and infinitely more corrosive. In some countries, when corporations are so closely intertwined with government agencies and purposes that their interests are indistinguishable, they call it fascism. Taken on the literal level, that’s what we’ve had here. It wrecked the economy, distorted markets, delivered stillborn policy decisions, and for a time eviscerated the body politic.
    The substantive criticism in this thread cannot be characterized as “throwing pies” at Glassman. Granted, Glassman had a larger critique and this discussion isn’t responding comprehsively to that.
    Professing to be an ‘idea entrepreneur’ does not distinguish between yourself and your commenters on that score, Steve. We’re eager to engage substantively on the issues the nation is confronting as well. When offered misplaced admonishment rather than regulatory integrity, though, the value of the voices naming that credibility gap are easily on par with Glassman’s ideas and personal demeanor.

    Reply

  31. Franklin says:

    With all due respect, Mr. Glassman,
    Resolution Trust Corporation;
    The First Bank of the U.S. started by Hamilton in 1791.
    Two examples of kind of nationalization model which were successful.
    Never mind that only the RTC is closely analogous to what we’re talking about with temporary nationalization.
    On the other hand, the House Bank is a really crazy analogy.
    The House Bank was answerable only to House oversight — not to the Senate, and not to the President. Unlike the House Bank, a nationalization structure would require oversight by all three branches of government.
    Oddly enough, in reference to the House Bank, the check on the abuses came from voters — quite a few of those Congressmen were served their walking papers by voters; which is a lot more than can be said about this current situation in cases where investment bankers have received bonuses for poor performance.
    There are no good solutions here — and certainly there are risks connected with a temporary nationalization that would require oversight mechanisms similar to the RTC. Most importantly though, those who enjoyed the upside of the bank growth, should also shoulder a larger part of the downside risk than we’re finding with the “capital injection with no-strings attached” alternative. Many of these big banks need to be broken up too.
    As a side note, I agree with the previous commentators, in any other profession — except for perhaps investment banker and professional punditry — the author of “Dow 36,000” would have lost his professional license and certification.

    Reply

  32. Chris says:

    The FDIC has already taken 14 banks into receivership so far in 2009 alone.
    How does that compare with Glassman’s shaky comparison with the House Bank?
    I found it faintly humorous when Glassman said “Imagine the temptation of running banks with assets in the trillions.”
    Assets in the trillions?…how about debt in the trillions.
    Besides nationalization would eliminate the zombie/corrupt bank nightmare Glassman predicts. Wiping out the shareholders, then restructuring the bank and placing it back in the private sector would mitigate the ability for government officials to abuse any power they may have.

    Reply

  33. questions says:

    Among my many typos lately is my screen name.

    Reply

  34. questins says:

    My sense, WigWag, is that there’s already been a kind of nationalization in that the public has dumped huge sums of money into these companies and has seemed mostly to be subsidizing a)bonuses b)vacations and spa-centered meetings c)hoarding of capital d)more bonuses and e)the covering up of shockingly large capital losses because of gross mismanagement of money.
    If the government actually gets some kind of vote because of the money we’ve dumped in, then maybe we can start pushing the companies towards some notion of serving the public good.
    In a way, the public/private rule debate is probably less of an issue than is that of transparency and oversight, but we have less of a right to oversee private entities than we do public entities. So in theory, making it all public should force more oversight.
    I think that what needs to happen ultimately is a move towards “stakeholder rights” in corporate charters, but that’s a big step away from capitalism in which capital is granted special treatment just for being capital. Not likely to happen any time soon, but might be a good destination. The stuff of civil and economic society is in the commons, not behind your fence.
    And I have to say, regular elections seems a better check on the bums than does once a century crisis and bail out.

    Reply

  35. WigWag says:

    Glassman has a point. Would everyone around here be so anxious to nationalize the banks if McCain had won and Phil Gramm was Secretary of the Treasury? What about if the crisis had occurred three years ago and John Snow was Treasury Secretary? How would Washington Note readers feel if it was Hank Paulson pulling the strings and deciding who gets a loan and who doesn’t?
    Yes, bad and greedy managers should be fired and if necessary punished but nationalization sounds fine as long as someone you like is ultimately in charge. If a government leader you don’t like is pulling the strings those greedy and incompetent bank managers might not look so bad after all.
    And what makes anyone think the government will do a better job of running the banks, even temporarily? Wasn’t it the former Secretary of the Treasury, Bob Rubin who presided (at least in part) over the demise of Citibank?
    What makes anyone think Geithner will do a better job than Vikram Pandit or Ken Lewis?

    Reply

  36. Steve Clemons says:

    Thanks folks — and by the way Spunky, I’m in town…your town.
    I gave the platform to Jim Glassman because I like him and he
    provokes my own thinking. You all may like to throw pies at
    what he is saying, but I met Jim Glassman first in 1995 when he
    invited my then boss Senator Jeff Bingaman on to a talk show he
    was doing. Jim hated most of the stuff we were putting together
    then about how to incentivize high wage job creation in the
    United States — but we converged around a shared view that
    the government was not tending the high tech ecosystem very
    well.
    Glassman wrote a book about the markets that has been
    ridiculed, but he’s a serious thinker — and believe me, I’ve
    written some stuff in the past that if that were the only portal
    one looked at me through, i’d be toast in some people’s folks
    eyes as well. In fact, they do — to some, believe it or not, I’m a
    neocon. 😉
    Seriously though, Jim’s point is that politicians don’t run firms
    well, and there are lots of examples of distorted trust in the
    past. He didn’t need to go to the House bank to show that. In
    my view, Duke Cunningham and Tom DeLay do just fine as
    examples….but still, there is a problem out there when it comes
    to readjusting the interests of firms with taxpayer money.
    Whether you like the messenger or not, the issue IS important –
    – and deserves debate….and whether some of you like it or not,
    I always enjoy debating Jim Glassman and hearing him out
    because he’s an ideas entrepreneur in DC. Like me in fact.
    I know that this will probably bring out a few catcalls — but I’m
    giving as genuine a response I can and moving on to other stuff.
    I like Jim Glassman — and I hope he keeps sharing his views. I
    think he was one of the better parts of the outgoing Bush
    administration and said some things in his role as Under
    Secretary of State for Public Diplomacy that were very important
    and which will actually make his successor’s job far easier.
    More soon — thanks much, and look forward to seeing you
    Spunkmeyer?
    best, steve

    Reply

  37. Dan Kervick says:

    I have no opinion on whether or not some banks should be nationalized. But this piece doesn’t contain any substantive arguments. It just contains two anecdotes, one dating back to the early nineteenth century. Surely opponents of nationalization can do better than this.

    Reply

  38. Spunkmeyer says:

    It occurs to me that Steve permitted this piece to be published so it
    could receive the full-throated heckling that the comments above
    seem to give… at least, I hope that’s the reason.

    Reply

  39. susan says:

    Someone give Glassman a bottle of Xanax:
    WALL STREET JOURNAL: CITI NATIONALIZATION
    COULD BE ANNOUNCED TODAY

    Reply

  40. TonyForesta says:

    Blistering commentary rich. Message-force multipliers on theright pretend to loath big government and preach about fiscal responsibility on TV, – but behind the peoples back in the cloak of night they work like demons to create the most massive porcine debt and deficit ridden government in American history and misshaping that government into massively engorged, woefully inefficient, and systemically corrupt bureaucracies serve their select interests, oligarchs, and cronies exclusively.
    It bothers me that Obama and his economic team have not forced the retirements, and in some instances reparations from the swindlers and thieves, – I mean Wall Street CEO’s and traders who are responsible for conjuring, profiting from, cloaking, and exacerbating the worst economic crisis since the depression.
    Why are these grotesquely overpaid ponzi scheme swindlers and thieves still employed?
    Obama’s economic tactics would have much more support, if those who are responsible for causing, cloaking, mismanaging, profiting wantonly from, and exacerbating the great unwinding are held accountable, removed from thier dismanagement positions, and if appropriate – fined and/or sent to prison.

    Reply

  41. questions says:

    Ditto rich and then some….
    Overdrafts at the House bank — yikes, I spend weeks and weeks out of the year owing my kids money I’ve “stolen” from them but I’m never in a position of having gambled away the money on derivatives and simply not having it anymore. I can pay them back anytime. Really. But I am in debt, overdrafted if you will, all the time. It’s the private sector, though, that came up with PayDay loans, H and R Block’s income tax return advanced loans and rent-to-own thievery. Come on. Which would you rather have, public or private enterprise?
    Second, the private sector is corrupt. We might not call it corruption because it’s private, but the waste of shareholder money, the insane salaries and bonuses paid out, the cornering of markets, the lobbying… it’s all corrupt.
    Third, the way to avoid public corruption is to make it profitable to do oversight. If deals are public and it’s in a newspaper’s financial interest to investigate, it’ll come out. Institutions can correct for a fair amount of political self-dealing.
    And finally, a little self-dealing is not the same as taking over an entire industry, sucking down billions/trillions, and disappearing into the night. Private investing has given us hedge funds, the housing bubble, Madoff and all his clones (no stock trading at all!!!!!). I’ll take a Congressman, thank you very much. They deal in millions, not trillions.
    I think it’s high time to have community/public localized banking where you can go to get loans that stay in your community and where upswings and downswings in an area are balanced by modest dreams. No hundred-million dollar shopping malls, but a hundred thousand dollar house is fine. If we limit the pool of loan money, we limit the size of the bubbles. No one gets insanely rich, but no one bursts, either. This model would be more sustainable, less sprawl-laden, more local and less franchised. It might not be a bad idea to limit the size of capital pools.

    Reply

  42. Dan says:

    Why do you continue to give a platform to the man who co-wrote Dow 36,000? I don’t understand why you would want to squander your credibility by associating with an individual who clearly is lacking in both intelligence and sound judgment.
    Some of your readers may not be familiar with Dow 36,000 and I think you are doing them a disservice by neglecting to include his authorship of that book in your brief introduction at the top of the page.

    Reply

  43. jonst says:

    No, the House bank is, in fact, “an inappropriate comparison”. This reads like a Bobby Jindal speech. Like he is writing for a bunch of 4th graders. I don’t intentionally mean to sound so dismissive but honestly, the column is worthy of dismissal.

    Reply

  44. ... says:

    this article is a real disappointment, and i agree with the other posters here, rich in particular.. all glassman seems able to do at this point is spread fear about nationalization of the banks… no mention of the degree of abuse and looting done by the present private banking system to bring things to this point where nationalization is being considered, but plenty of fear mongering towards the obvious option…
    a treasury bill is an iou from the gov’t to the federal reserve – a private bank – paid for by the us gov’t (taxpayers) to print and lend money for it’s own activities.. does it make sense to pay the federal reserve this when it could be done by the gov’t without the interest costs?? the fact the gov’t is paying interest on money it owes the federal reserve has worked well for private banks while not working out very well for the citizens of the usa… the cost to service the ‘debt’ is a ridiculously large amount of money… of course the private banking industry overseen by the federal reserve would not want any of this to change… how is it working out since it’s inception in 1913 mr glassman????
    fannie mae and freddie mac were used as a vehicle to inflate the housing market.. this was something the federal reserve sanctioned… the thinking was they are gse’s ( government supported enterprises) and the gov’t would bail them out if they ran into problems… the private banking industry is happy to get at taxpayers money anyway it can, with disaster leading to bailout a favourite way to do it historically…
    asset backed securities were sanctioned by the federal reserve.. this is way to lump very speculative and potentially very dangerous assets, mortgages and etc. in a package that mutual funds and pension plans were allowed to invest in.. indeed this is an important component to the collapse in this same market with obvious disaster that has unfolded…. who authorized these financial products while turning a blind eye to the dangers implicit in them??? the federal reserve… the federal reserve needs to be done away with, and that much is very clear to anyone honest enough to see how corrupt it is..
    mr glassman, you need to assume responsibility for being a lot more knowledgeable on why things are where they are at present if you are going to write articles promoting fear of the alternatives….

    Reply

  45. Bart says:

    All he has is the House Bank?!
    Given the extent to which the banks have been looted by the private sector, no govenment agency could do as poorly. Plus, we will be auditing down to the granularity of potty breaks as I understand it.

    Reply

  46. rich says:

    [Note: If I recall correctly, Glassman’s someone for whom I’ve had great respect. I’ll have to review and verify that estimation & whether it’s the same guy.
    With all due respect, Glassman’s cautionary note is nothing more than a smear job.
    Or, at best, it’s an intentionally misleading straw man: anyone who watched Tim Geithner speaking with Jim Lehrer last night knows that Glassman’s House Bank Example has no bearing on President Obama’s approach to cleaning up insolvent banks. Government will NOT be owning or operating banks. Geither & Obama use private sector mechanisms to eliminate the problem. Glassman omits to mention that key fact.
    Glassman’s example doesn’t apply, and he’s put it forth to shore up a bankrupt ideology. Misrepresenting the landscape though, at this point in the crisis, is fundamentally irresponsible.
    Worse, Glassman is guilty of egregious and naked hypocrisy: this post merely accuses the public sector of being somehow prone to doing precisely what the private sector has indulged in with enormous and unconstrained impunity. While bankers and privateers have used corporate coffers as their very own money baths and employee pension funds as personal golden showers, Glassman made no stink and raised no objection.
    The metaphor is apt: John Thain spent $1.2 billion to renovate his office, toilet included–but was too incompetent to understand how his products worked or what Merrill Lynch was worth. The whole executive operation was a sewer clothed in a golden commode, and any humble peasant knows what comes out of that kind of management in the end. Could it be that not being able to explain what your product is, or how you make your money or whether you actually do make money, are always the first clue, for ordinary mortals at least, to clean house, end patently odious practices, and step down? Even the NYTs is still subject to this idiocy, running articles asking for sympathy because these “blind mouths” (thx John Milton) actually contend it’s not possible to live on $500,000 per. He forgets that the onus is not on the government.
    Glassman is dead wrong on THE critical point. It’s the private sector that failed, and failed spectacularly. NOT the public sector. The private sector failed to operate profitably, transparently and ethically within the private market. The market that ideologues and fraudsters repeatedly claimed did not need regulation–an obvious lie that ignored the hard-earned lessons of 1929 and subsequent Great Depression it caused. (NOTE that Glassman led major publishing organs while that ideology was pushed in the media, rarely challenged by major pundits, and rammed down the throats of the American people. WE didn’t forget the 1929 Stock Market Crash–those media outlets did. Now Glassman doesn’t want to take his medicine.)
    You’ll forgive my forthrightness. But the point still had to be made, because it obviously hasn’t gotten through:
    For Glassman to sermonize about “nationalization” when that full-bore option is explicitly not on the table is unacceptable. Time for Glassman to put his shoulder to the wheel and deal accurately with what’s happening and what needs to happen.
    At this point, given the recalcitrance to contribute substantively and constructively, and the continued refusal of bankers & their paid ideological support services (Glassman) to clean their own house, many elected officials & economists are rapidly coming to the conclusion that, in fact, last-ditch full-bore nationalization may be the only option. But Glassman & Co. have no one to blame but themselves, and their failures, excesses and frauds, for that. His cautionary red herring is, in that context, an abuse and a semantic fraud.
    The kicker? Glassman is an AEI ‘fellow’.
    http://www.aei.org/scholars/scholarID.21,filter./scholar.asp
    Two points stand out from the list of career highlights:
    –Member, Advisory Board on Public Diplomacy in the Arab and Muslim World, 2003
    Hey, how’d that pan out for America? Bang up job on maintaining positive relations abroad, Glassman.
    Second, Glassman’s guided major influential publishing outlets through the 1990s and 2000s — just as these media organs systematically expunged dissenting opinions from their own ranks, engaged in actively cheerleading for deregulation, turned a blind eye to baseless and corrosive militarism, and enabled full-on abuse of power. Glassman himself may not have–as I’ve said his name was someone I thought I admired–but he nonetheless presided over an era in which the basic function of the fourth estate was virtually eviscerated, with disastrous results.
    Let’s not be hasty. Let’s assess Glassman’s work at the American Enterprise Institute on substance alone, and ignore the high probability that the position makes him a paid liar. But this post does him no favors. It ignores the actual policies proposed. It ignores the causative backdrop and urgent context. It misleads about basic responsibilty and sectoral functioning. And the sin he locates in the public sphere was committed by the private sector. Some admonishment!
    Look, I’d thought the world of Glassman. But if everything he’s done in life has led him to this point .. . just step aside. Get out of the way. Put aside your ego; you’ve cul-de-sac’d at the AEI.
    You’re fiddling while Rome burns and wallowing in irrelevant memories of what retired members of Congress did at a deceased bank several decades ago.
    That has exactly zero to do with the conscious, calculated private sector fraud and the open celebration of the cut-n-run mentality which pushed us over the economic precipice. It has exactly zero to do with what’s on the table. There’s no room for calls for ‘responsibility’ from that quarter.
    Again, Glassman may be a great guy. Posting a barren, ideological husk — and artifact of an era that wrought this economic catastrophe — is as offensive as it useless. Get up to speed. We don’t have time for this.
    I suggest this is why some folks don’t recognize the direct meaning and substantive importance of President Obama’s recent speech.
    Has Glassman done great work along the way? Absolutely. Can we afford continued failure? No way in hell.

    Reply

  47. JohnH says:

    Financial commentary from the man who wrote Dow 36,000? Surely, you jest. Washington chutzpah never lets up!
    That said, Glassman is right, in a sense. Nationalized bank could theoretically be used for political exploitation, as he should well know. His boss, George Bush, used the Justice Department just that way. However, there are ways to structure the deal–like the Post Office–so that it does not become subject to political influence. Also, governments in Europe have run postal banks for decades without problem.
    Now, for a serious discussion of the pros and cons of bank nationalization and bailouts (between a rock and a hard place):
    http://www.rgemonitor.com/roubini-monitor/255740/the_case_for_and_against_bank_nationalization

    Reply

  48. riffle says:

    Sorry, Glassman. If you co-write a book called “Dow 36,000,” you don’t get to pronounce anything of importance ever again without people just laughing at you.
    http://en.wikipedia.org/wiki/Dow_36,000
    You’re a laughingstock, and it’s hard to find a more deserving one.

    Reply

  49. Spunkmeyer says:

    Mr Glassman, government intervention is not an either/or
    proposition, and surely you know that.
    If the intent is for the government to adopt the Swedish model –
    – meaning that the government involvement is to figure out the
    real story of the books — with a privatized bank entity at the
    end of the day, that’s different than what you’re warning us
    about. This doesn’t seem much different of a process than what
    FDIC investigators do when a bank fails — as 8 have already this
    month. More may fail tomorrow.
    I personally have no issues with this approach because I do not
    feel we are ever going to get a straight answer out of any banks
    about their real situation. We will continue to bleed money
    without any gain. Either we refuse to give any more money, or
    take them over now, Swedish style.

    Reply

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