Krugman: The case for nationalization

Banking on the Brink

I couldn't agree with Krugman more. The reason why a lot of the so-called "free-marketeers" in this country are so against nationalization is because it would mean the stock holders of banks like Citi and B of A would lose most of their money. It just so happens that a lot of these "free-marketeers' also happen to be stock holders who stand to lose said money. They made a bad investment, why should they be bailed out by the taxpayers? That's socialism at it's best right there.

The reality is these banks have ran themselves into the ground, and since no private investors can save them, the government is the only option left. Now as a 'shareholder' in the government (through the taxes I pay each year), I don't want them to prop up these banks until they start profiting again while we will take their losses as they occur. This is a huge slight to the taxpayer, and a huge gain for the stock holders in these companies. If we save these banks, just like in the free market, I would expect that we (the taxpayer and govt) should benefit from our investment. To expect the government and taxpayer to invest tons of money in the banks and see no return on it goes against everything the free market stands for.

In addition, and before "free marketeers" get their panties in a bunch, I also believe we should return the banks to private hands as soon as we can after they are cleaned up and rid of their bad assets. However, the reality is that until we nationalize these banks, their artificially inflated values and bad assets will keep them from making the correction needed to become viable again and attractive to private investors.

Bottom line: It's the stock market, and people who invested in these banks can him and haw at the management for running them into the ground, but in sticking with free market principles, they deserve to lose their money. The taxpayer should not be expected to take all the losses and downside while not being able to share in the profit and upside.