Doctor Doom Says It's Time to Nationalize

Temporary takeover isn't 'Bolshevik'—it's the only option

By Kevin Spak, Newser Staff

Posted Feb 21, 2009 9:25 AM CST

(Newser) – Nouriel Roubini thinks it will soon be time to nationalize the banks, and these days people listen to Nouriel Roubini. For years the NYU economist has been predicting financial catastrophe, earning the nickname “Doctor Doom,” so he’s now looking pretty prescient. “No one’s in favor of a permanent government takeover of the financial system,” he tells the Wall Street Journal, but temporary ownership is so "pragmatic" under the current circumstances, even fiscal conservatives ought to embrace it.

“Paradoxically, the proposal is more market-friendly than the alternative of zombie banks,” Roubini explains, and it’s much cheaper. That’s why some Republicans have already said they’re open to the idea. Roubini thinks it’ll really gain steam in six months, because naturally, he expects things to get worse. “Six months from now, even firms that today look solvent, are going to look insolvent,” he predicts.

[Images (2)]

[Quotes (4)]

New York University economist Nouriel Roubini speaks at the Council on Foreign Relations in New York on Friday, April 25, 2008. Roubini is also Chairman of Roubini Global Economics. (AP Photo/Mark Lennihan)

Nouriel Roubini, professor of economics and international business at New York University, testifies before the Joint Economic Committee October 30, 2008 on Capitol Hill in Washington, DC. (Getty Images)

« Prev« Prev | Next »Next » Slideshow

De facto, the government is already controlling a good chunk of the banking system. The question is: Do you want to move to the de jure step. - Nouriel Roubini

I believe in market economics. But to paraphrase Churchill, a market economy might be the worst economic regime available, apart from the alternatives. - Nouriel Roubini

You can't take two zombie banks, put them together, and make a strong bank. It's like having two drunks trying to keep each other standing.
- Nouriel Roubini, on the spate of big bank acquisitions

Six months from now, even firms that today look solvent are going to look insolvent. Most of the major banks— almost all of them—are going to look insolvent. - Nouriel Roubini

« Prev« Prev | Next »Next » Slideshow

To report an error on this story, notify our editors.

More Newser Stories

Dr. Doom Fears a Double Dip Recession

Roubini thinks macro data contradict cheery recovery theories

(NEWSER) - There’s a debate raging over whether the US will recover quickly or undergo a painful double-dip recession . Guess which side eternal pessimist Nouriel Roubini is on? Dr. Doom doesn’t like the macroeconomic numbers he’s seeing. The horrendous consumer confidence, housing and employment numbers “actually suggest a significant downside risk even to the anemic levels of growth which I forecast for” the first half of 2010, he writes in Forbes. More»

Economy Is on an Upswing, Says Dr. Doom

Roubini predicts end to recession, sends markets jumping

(NEWSER) - The financial crisis is over and the worst of the recession is behind us, writes Nouriel Roubini, the extremely pessimistic economist who was among the few who predicted the scale of the downturn. "The light at the end of the tunnel is for once not an incoming train," he told investors at a lecture yesterday in New York. But with unemployment in the US nearing 10%, Roubini thinks a second stimulus is necessary. More»

Nationalizing Banks Looks More and More Likely

Case for Nationalization grows

(NEWSER) - Team Obama is coming closer and closer to using the N-word they've been studiously avoiding: nationalize. Already the government is the top shareholder at both Bank of America and Citigroup, and with both banks in freefall, many think buying the rest is the only option. “I would guess that sometime in the next few weeks, President Obama and Tim Geithner will come out and say, ‘It’s much worse than we thought,’ and just bite the bullet,” said one economist. More»

Create a Good 'Bad Bank' to Ease Crisis

Institutions must write down toxic assets to ease larger woes

(NEWSER) - The world’s banking crisis is entering its endgame, and it’s time to shore up the most troubled institutions using a strategy that worked in Sweden in the 1990s, writes David Roche in the Wall Street Journal. It won't be easy, he warns: "A good bad bank forces banks to write down their bad assets and cleanse their balance sheets with those made insolvent being recapitalized, nationalized, or liquidated by the state." More»

Will US Nationalize Banks?

As red ink continues to flow, more experts say some nationalization is likely

(NEWSER) - With US banks likely to need as much as $2 trillion in capital in coming months, more experts are seeing semi-nationalization as a distinct possibility, writes Reuters reporter Dan Wilchins. The government already is using its $700 billion bailout to put pressure on banks. The Obama administration is on record as saying that it will push banks seeking federal funds for more concessions, specifically limiting dividends and executive pay. More»

NEWS FROM OUR PARTNERS

What is Newser?

Face it: there's too much news. At Newser, we choose the most thought-provoking and entertaining stories from hundreds of US and international sources and reduce them to a headline, picture, and two paragraphs. And we do it 24/7—you can come back morning, noon, night (and in between) for something new that matters. Read less, know more.

Learn more »

Partnering with: Slate

View Newser on the mobile website

Doctor Doom Says It's Time to Nationalize