Why the Government Is Hesitant About the Whole Nationalization Thing

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They'll be greeted as liberators? Photo: Getty Images

So long as the government is going to give companies like Citigroup and Bank of America and AIG billion-dollar infusions every five minutes or so, they might as well just outright take ownership, a lot of people, including Nobel Prize–winning economist Paul Krugman, have said lately. That way we'd have control over how they were spending the money and could reap the benefits once they start making money again. It seems like a pretty simple plan, but the administration is hesitant, even as it seems ever more likely.

"We absolutely believe that our private banking system is best off being in private hands and we are trying our best to keep it that way," one senior administration official told the Times today. Though: "Given our involvement at this particular stage, there is an element, a possibility over time, that we will end up with some ownership of these institutions." Why all the hemming and hawing, guy? Why not just swoop in there and clean stuff up? Well. Further down in the article, one economist puts things into stark perspective:

“They are desperate to not nationalize the banks,” said Robert J. Barbera, chief economist at ITG. “They know what happened when they took Iraq and they would just as soon not take over the banks, because if you own it, you gotta fix it.”



There you have it. Fixing the U.S. banking system would be as complicated and treacherous as rebuilding Iraq.



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