Chevelle on nationalization

If you don't read her blog, you should: http://modelsagents.blogspot.com/

A self-described: physicist, philosopher, ex-concert pianist, corporate financier, freelance journalist, traveler, economist, bond girl

She conducts a most excellent discussion of the Geithner dilemma, and ends with this wonderful 'to do' list for Mr Geithner:

"My To-Do List, by T.G. "

1. Calculate the hole in the banking system on a mark-to-market basis

2. Assess the probability that its size will prompt a popular revolt

3. If higher than 70%, prepare for the orderly liquidation of selected financial institutions.

• Emphasis on “prepare”, “orderly” and “not screwing up” (again). Note to self: In the (unlikely, of course) scenario where “orderly” demands the exercise of the N(uclear) option, convene urgently a panel of linguists to find a politically-acceptable term for the policy move.

4. Re-calculate the hole in the banking system that remains.

5. Now choose between:(a) Bailing out the banks via recapitalization (b) Subsidizing private funds sufficiently to get them to bid the “fair” prices you need to cover the banks’ hole.

• The pros of (a): Faster and “cleaner”, probably. The cons of (a): Americans' loathing for higher government ownership of banks. Americans bigger loathing for a fresh fat bailout for the bankers. An 83% probability that I receive their collective wrath, eggs and tomatoes within 12 months.
• Pros of (b): The word “private” features prominently in the PPIF acronym. Problems with (b): The fairness and fragmentation issues above; implementation delays, due to complexities in designing the terms and conditions for participation etc. (a la (TALF)(Second note to self: If we went for (b), avoid at all costs giving the impression that the government will be effectively setting the prices for the toxic assets.)

6. Oh, and before I forget… file my tax returns by April 15th!

And, since we are sympatico, Chevelle et moi, I fully endorse ce ci:

Conclusion : Ultimately, the government is in this either way. So rather than going around in circles, Geithner should just try to solve the problem with an end-game in mind.

Amen