One hears loose talk these days about a lack of “investor confidence” in the Obama administration’s ideas about resuscitating “zombie banks,” those super-conglomerates whose liabilities exceed their assets. For “investor confidence” read willing bankers. The folks who brought on the most profound economic collapse since the Great Depression, after receiving trillions of dollars from the federal government in capital infusions, loans, guarantees and central bank facilities as they await the government’s assumption of their toxic debt, are reluctant to get the banks working again because the Obama-Geithner plan is too vague or too improvised to give them confidence in the future. Come on! Get over yourselves, guys. Economic historians tell us there are just two strategies for dealing with economic crises of this magnitude: Roosevelt II and Roosevelt I--to muddle through like F.D.R., or to bust the trusts like T.R. If they don’t like strategy I, then it should be no news that strategy II is not far off.
Bankers should be relieved that for now President Obama has chosen to follow F.D.R.’s model. If not, they should tell us what they want from Mr. Obama and the country. But then they should tell the country why we should believe in them any longer. Why should the citizenry, the ordinary taxpayers, trust them, their expectations, and their dangerously smart ideas any more as we continue to discover each day they are still gaming the system? Up to now they have kept their fresh ideas as closely guarded as their negative balance sheets were just a few month ago. Let them speak up and win the nation’s confidence; and if they fail–and they probably will, because the titans of finance, like mainline economists, are devoid of any fresh ideas–then it is time to nationalize the banks until the state can regain the full value of its multiple subsidies. “Better a temporary ward of the state,” concedes that hoary voice of capitalism The Economist, “than a permanent zombie.”
"The Lemon socialism” that in good times gives the profits to the financiers and asks the public to eat the losses in bad times is not a capitalism worth waiting to revive. It is time for a little boy to shout out, “The emperor has no clothes,” and for the adults to get on with building a new banking system they have been too afraid or too blind to do until now.
Drew Christiansen, S.J.