No US bank nationalisation without state control
Bankers will not hesitate to enrich themselves at the expense of the public good.
by Esther Duflo, Daily Markets
March 6, 2009 — The Obama administration is reluctant to nationalize banks (or at least some of them). The word nationalization, until recently almost coarse in the American vocabulary, has made its debut on television and in newspapers.
The first on the list are the two biggest banks, Citibank and Bank of America, whose stock price has collapsed due to rumours that the government may soon take control. Republicans stifle it. For them, the relaunch plan is too European (the new Communism!). But economists who call for nationalization are increasingly numerous.
The argument heard most in favour of nationalization of banks is financial. Their losses were so important (the time of billions is over, we are now in trillions!) that only the government is in a position to save the financial system by investing heavily in ailing banks. At the end of the Bush administration, the Paulson plan included taking stakes in state banks without voting rights.
But the rights of the taxpayers must be protected; the state can not become the main shareholder of banks without taking their control. . .
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Esther Duflo is the Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics in the Department of Economics at the Massachusetts Institute of Technology.
Links and sources
Warning Against Bank Nationalisation Without State Control, by Esther Duflo, Daily Markets, March 6 2009
Posted: March 11, 2009
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