Nieman Watchdog > Ask This > Questions about nationalizing the banks

Questions about nationalizing the banks
ASK THIS | March 11, 2009

The U.S. government may be on the verge of nationalizing large banks. Two experts who anticipated America's financial collapse on this Web site as early as 2005, Martin Lobel and Henry M. Banta, propose basic questions reporters should ask about nationalization.

By Martin Lobel and Henry M. Banta
Lobel@LNLlaw.com
henrybanta@aol.com

We generally favor the temporary nationalization – not because of what we know, but because the better arguments seem to be coming from people we respect, such as Paul Krugman. Here are some fundamental questions the press should be asking:

Q. What is it we want banks to do? More simply, what is a bank? Is it just an intermediator between lender and borrowers, allocating capital to its best use? Or are there other functions we want it to perform?

Q. How will nationalization help us get the kind of financial system we want?

Q. What is “nationalization”? When very large banks get into trouble why can’t they be treated as smaller banks and savings and loans are by the FDIC? Are they really too big to fail?

Q. What activities got the large banks into trouble? Were these the traditional activities of commercial banks? Did they involve trading in nontransparent securities in unregulated markets? Did they involve taking huge risks based on inadequate computer models?

Q. What role did the banks play in the creation of a parallel or shadow banking system beyond the reach or even the view of regulators?

Q. Should banks be limited to traditional commercial banking functions?

Q. How do we regulate the rest of the financial system?

(Martin Lobel wrote about the impending banking collapse in this 2006 article on Nieman Watchdog and in this one in 2007. Henry M. Banta brought attention to two of the most irksome aspects of the financial collapse—economic inequality and obscene executive pay—in this 2005 article, this one in 2006, this one, also in 2006, and this one in early 2008. In some of these, the writers were highly critical of press performance.)

Henry M. Banta is a partner in the Washington, DC, law firm of Lobel, Novins & Lamont.

E-mail: henrybanta@aol.com

Martin Lobel is a partner in Lobel, Novins & Lamont, a Washington, DC, law firm, and chairman of the board of Tax Analysts (www.tax.org), a source for journalists.

E-mail: Lobel@LNLlaw.com

Comments

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Where Was The Press When Merrill Handed Out $3.6b?
Posted by Bryce Shonka
03/31/2009, 03:15 PM
If the AIG bonuses inspired contempt, just imagine what's brewing once the AMerican taxpayer figures out that 22 times that amount went to Merrill Lynch execs in December. Where was the press? I expand on the question here.

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