The Case for Nationalizing our Banks

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Nouriel Roubini, rock star economist and professor at NYU, who is sometimes referred to as, "Doctor Doom," is anything but a downer according to Tunku Varadarajan's column in yesterday's Wall Street Journal.

"The man has instant impact on public debate. An idea he floated only last week -- that our "zombie banks" be temporarily nationalized -- aired first on Forbes.com, where he writes a weekly column. It has evolved, in the space of just a few days, from radical solution to almost received wisdom," says the Varadarajan column.

It "is something the partisans would have regarded as anathema a few weeks ago. But when I and others put it in the context of the Swedish approach [of the 1990s] -- i.e. you take banks over, you clean them up, and you sell them in rapid order to the private sector -- it's clear that it's temporary. No one's in favor of a permanent government takeover of the financial system," opines Roubini.

Even Lindsey Graham, the conservative Republican Senator from South Carolina, says he wouldn't take the idea off the table and Alan Greenspan, former head of the Fed said this week in Financial Times, "it may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring."

"I think that we're going to see the policy adopted in the next few months . . . in six months or so," states Roubini. "Six months from now, even firms that today look solvent are going to look insolvent. Most of the major banks -- almost all of them -- are going to look insolvent. In which case, if you take them all over all at once, you cause less damage than if you would if you took over a couple now, and created so much confusion and panic and nervousness," he continues.

But you can read the whole story on the WSJ opinion page (link under title of this column). Be sure to pay attention to the part about how the press has covered this whole situation.