New Fox News Op-ed: If We Nationalize Our Banks They Will Become Political Institutions

My new piece at Fox News is pretty long and it starts off this way:

Why has the stock market fallen so much as politicians have talked about nationalizing the banks? If this was such a wonderful way of fixing credit markets, wouldn’t you think that stocks would go up?

The discussion might not be academic any longer with reports in today’s Wall Street Journal and elsewhere that the Obama administration is talking with Citibank about taking over as much as 40 percent of the company’s stock. Such a move would make the government not only Citi’s largest shareholder, by far, but it would effectively give the government complete control.

Politicians from Senate Banking Committee Chairman Christopher Dodd (D-Conn.) to Senator Lindsey Graham (R-S.C.) support nationalization. Democratic economists such as Joseph Stiglitz and Paul Krugman, and Alan Blinder also support it. Even former Federal Reserve Chairman Alan Greenspan supports a very limited nationalization. President Obama has already been on the record saying he opposed nationalization but now the state of negotiations with Citi has apparently already changed his mind.

Nationalization is being sold as necessary to help the banks but some banks were forced to take bailout funds over their objections last fall. Now some banks such as Bank of America are objecting to this new “help.” And who can blame them? Bank of America has continued to remain profitable despite being coaxed by the Federal Reserve to take over troubled financial institutions. . . .