This guy, Simon Johnson. He really is everywhere now, huh? Former IMF economists turned MIT professor-bloggers aren't supposed to competing with Lindsay Lohan for Internet space, but in the world of econoblogging, Simon Johnson apparently is Lindsay Lohan. At this rate, he'll be guest-judging the last episode of American Idol and holding down the cover story in the next Men's Health entitled "The Diet Coup."
Johnson's big idea is that 1) America has ceded too much power to Wall Street oligarchs and 2) we need to nationalize our banks and then break them up. These are two really important points. But I also think they raise two logical objections.
1) If America ceded too much power to Wall Street oligarchs, then how do we have episodes like Megan reported where the federal government essentially forced Bank of America to buy Merrill Lynch? If we're a oligarchical nation, BoA CEO Ken Lewis should be a cross between John Pierpont Morgan and the dalai lama. Instead he's being forced to eat Merrill's crap sandwich of assets. That probably doesn't fill Johnson with self-confidence, since he doesn't think that "too big" banks should exist, in the first place (a good point). But under Johnson's theory of American oligarchy, this strikes me as quite the poodle-bites-owner story.
There are other cracks I see in the argument that we can't stand up to banks because they're just too powerful, like this about how Geithner has suggested he might not let the banks pay back their TARP money; or the fact that bankers are practically bawling their eyes out to any reporter that will hear their plaintive cries of government intrusion. We let the banks get too powerful, yes. But I don't think that's our problem now. Which leads to the second point.
2) Here's a list of people who have come out in at least tepid support of nationalization. It's a incredible assortment of names that criss-crosses political boundaries and includes the maestro himself, Alan Greenspan -- no enemy of banks. Who's on the record against? Obama, Geithner, Bernanke and Barney Frank -- the ones in charge.
Johnson's argument, I guess, is
that the people in charge of policy are against nationalization because
of an ingrained American hierachry in which bankers have assumed an
untouchable position above the government. But it seems to me that the
people in charge of policy are against nationalization because they're
afraid of the political consequences of owning the US banking system if
other options are on the table.The only way to get around that political hurdle is give the impression that you've tried everything else.
I do think we're in the let's-try-everything-else phase of the bank
bailouts, and if everything else doesn't work, I think it's likely that
Johnson will get his wish and we'll see some swift nationalization of
To turn this criticism into a praise sandwich of sorts, I want to stress that, a weird way, I still think Simon Johnson's media crusade for nationalization is actually a valuable thing. Why? Because if the primary impediment to nationalization is political realities, then Johnson's promoting a policy to the left of the administration has the potential to change the political landscape by mainstreaming the idea that nationalization is a desirable, even inevitable, approach to the bank crisis.
So in the end, I suppose we're all confused. Simon Johnson thinks we're in an oligarchy while the oligarchs cry; I think Simon Johnson's imprecise argument about American oligarchy is actually helpful; and our anti-nationalization government is crossing off ideas on a list that probably ends with with the word nationalization. Happy Friday.
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