Two Important Statements on Nationalization

In a speech yesterday in Omaha, the President of the Federal Reserve Bank of Kansas City broke with the Bernanke/Geithner line on the banks and suggested that temporary receivership and firing current management (which all amounts to the dreaded ‘nationalization’) is what is required to solve the banking crisis in a systematic fashion. Here’s Bloomberg’s run-down. And here’s the speech itself.

And then today in the Times we have Alan Blinder, long-time advisor to Dems and former Fed Vice Chair, saying no. It’s not a good idea.

As you know, I lean against Blinder’s side of this argument. But at a minimum he raises some strong practical difficulties that would be involved in nationalization (particularly the where to draw the line issue). His suggestion is to return to the good bank/bad bank concept.

Late Update: Naked Capitalism has an ample takedown of Blinder’s argument, which to my mind at least seem pretty persuasive.