By John Tamny, RealClearMarkets
In the past week a number of boldfaced names including Sen. Lindsey Graham, Harvard economist Greg Mankiw, economist of the moment Nouriel Roubini, and ex-Fed Chairman Alan Greenspan have suggested that the surest path out of our government-driven financial crisis is for that same government to take over some of our struggling banks. This isn’t The Twilight Zone – that show was cancelled years ago – but this is the growing consensus among some of the best known economic thinkers here and around the world.
On its very face, nationalization is a truly awful idea. We’re regularly told that the collapse of major banks is the major risk to our economic health, but it’s more realistic to say that the greater risk involves government control of those same institutions. Be it a bank or any kind of business, when their owners aren’t motivated by profits, and that describes the federal government perfectly, they no longer face the exacting discipline of investors who demand market returns.
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