Hey, Paul Krugman

Richard Posner's argument against nationalization:

Impatience with the [Geithner] plan leads some economists to advocate the government's "nationalizing" the weak banks, but that would be a mistake. This is not only because of the manifest inability of the government to manage banks competently, but also because the vexing problem of valuing the overvalued assets cannot be avoided in this way. The banks are not broke; if the government takes them over, it will have to compensate the owners for the net value of the assets that the government takes, including any overvalued assets that, despite being overvalued, have some value. Perhaps what the government could do would be to take (with compensation) all the good assets of the bank, leaving the overvalued ones with the shareholders; then the bank's balance sheet would be "clean." But then what would it do with the bank? Run it? Sell it? The practical complications would be immense.