In an intellectual cage match between Nobel Prize-winning economist Joseph Stiglitz and voice of the Republican Party Rush Limbaugh on dealing with bank failures, my money’s on the smart fella who previously worked for the World Bank.
Zach Carter at The Media Consortium’s economic news ladder points to an informative interview on the banking crisis that should lay to rest the fear-mongering GOP talking points:
Stiglitz argues that much of the resistance to nationalizing the nation’s largest banks is based on a misunderstanding about how the nationalization process works. In an illuminating interview with Talking Points Memo, Stiglitz states that banks fail all the time and are placed into government hands to be disposed of. Lately, a handful of banks have failed every week.
“Banks have failed over and over again in the history of America, in the
history of capitalism,” Stiglitz says. “To mention some recent examples,
Washington Mutual went into bankruptcy, a number of banks went into
bankruptcy . . . . It didn’t lead to a fundamentally systemic problem.”When this happens, the government either takes the bank over for a short
period of time and sells it to another bank, or liquidates the failed
bank’s assets. The nationalization solution that progressive economists
are pushing is simply the first approach. The nationalized bank is even
kept open while its books are put in order, and when its affairs are
straightened out, the government sells the company back out into the
marketplace. The FDIC has decades of experience with this kind of
operation.
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