In the banker's pocket

Well Chronicler, its not just Obama who is in the banker's pocket. We all are. And we are in so deep that we can't even see our way out. Last night Obama had a great discussion about nationalizing the banks:

"Well, you know, it's interesting,'' Obama says. "There are two countries who have gone through some big financial crises over the last decade or two.

"One was Japan, which never really acknowledged the scale and magnitude of the problems in their banking system and that resulted in what's called "The Lost Decade." They kept on trying to paper over the problems. The markets sort of stayed up because the Japanese government kept on pumping money in. But eventually, nothing happened and they didn't see any growth whatsoever.

"Sweden, on the other hand, had a problem like this. They took over the banks, nationalized them, got rid of the bad assets, resold the banks and a couple years later, they were going again. So you'd think looking at it, Sweden looks like a good model.

"Here's the problem -- Sweden had like five banks,'' Obama says. "We've got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the, the problems in terms of managing and overseeing anything of that scale, I think, would -- our assessment was that it wouldn't make sense. And we also have different traditions in this country.

"Obviously Sweden has a different set of cultures in terms of how the government relates to markets and, and America's different. And we want to retain a strong sense of that private capital fulfilling the core -- core investment needs of this country,'' he says. "And so, what we've tried to do is to apply some of the tough love that's going to be necessary, but do it in a way that's also recognizing we've got big private capital markets and, and ultimately that's going to be the key to getting credit flowing again. ''

So, its clear that Obama realizes that the Swedish model is ideal, if you can pull it off. But he's not sure we can pull it off, and I'm not either. There's another reason why, and its not one that Obama can say out loud. A commenter at Ezra Klein sums it up well:

Obama and his people aren't stupid. They know they're going to have to nationalize some percentage of banks unless we want to look like Japan.

But they don't know which ones. And they can't afford, politically or financially, to just take over the entire industry en masse. So, how do you kill some banks without toppling a very precarious financial industry?

The analogy I'm using is anthrax in your herd of steers. You have to figure out which ones are infected and cull them without panicking the entire herd and setting off a stampede that will kill everybody in town.

So, they're gonna bring in private investors to valuate the bad assets, and then do a "stress test" on the solvency of the banks now that these assets finally have a dollar value on them. And guess what happens if you don't pass?

Wall Street dipped yesterday because investors realized they weren't going to get another blank check from Uncle Sam. Obama is trying to avoid what happens if they realize he's going to start culling the herd.

So that's the situation Obama is stuck in. Damned if he does, damned if he don't. And Maureen Dowd really sucks. Where was she in Gore vs. Bush? Was she on the side of the economic royalists then? Yes. She was picking on Gore for having his wardrobe picked out by Naomi Wolf, she even made that crap up. She really is the worst of the worst, the most vapid of the vapid. The NYTimes might as well give a column to Joan Rivers.