The Case for Nationalization

Time to take your daily economic medicine: A pair of articles today recommends that the United States nationalize its ailing banks. In the Financial Times, George Soros writes that we should cripple the “aggregator bank” idea’s new legs: It failed the first time because it’s too difficult to value the toxic assets and it should fail for that reason again. Soros suggests we nationalize the banks, and The New York Times looks to Sweden today for a model on how to do so. In the early nineties, Sweden’s center-right government nationalized banks, quickly turned the economy around, and even made money for taxpayers in the long run. The Swedish government took full ownership of bad banks, giving them taxpayer money so they could resume lending. “If you go in with capital, you should have full voting rights,” said Bo Lundgren, Sweden’s minister of fiscal and financial affairs at the time. One downside: In the process of nationalization, existing shareholders are wiped out.