Zombie bank kitteh from I Can Has Cheezburger?
The proletariat isn’t killing capitalism. The banks are.
This is not an economics blog, but I thought Robert Reich really nailed it in his commentary on the big bonuses AIG is paying to the guys who orchestrated the failure of our economy:
This sordid story of government helplessness in the face of massive taxpayer commitments illustrates better than anything to date why the government should take over any institution that’s “too big to fail” and which has cost taxpayers dearly. Such institutions are no longer within the capitalist system because they are no longer accountable to the market. [my emphasis]
The Obama Administration’s greatest failure, so far, has been its unwillingness to insist on accountability. The lack of accountability built into the initial rescue package should have been obvious to the least perspicacious economic minds. I mean, it was obvious to me! But I thought Obama would institute accountability even though his appointees helped get us into this mess. I hoped he’d override Timothy Geithner on at least this one point.
Why is Robert Reich not in the White House? Why not Joseph Stiglitz? Dean Baker? George Soros? I could name a half-dozen other people who aren’t so personally invested as Geithner or Larry Summers in maintaining the status quo. For crying out loud, Badtux the Snarky Penguin would make a helluva better Treasury Secretary than Geithner. (See this post for just one example of why I’m not joking about this!)
AIG and its ilk are going to have to be nationalized (or put into receivership, or whatever euphemism you prefer) sooner or later. The only question is whether Obama has the nerve and foresight to do it now, and not wait until another trillion or so is squandered. Joseph Stiglitz has a smart explanation of what’s going wrong and how to fix it: basically, by splitting each of the zombie banks into two pieces, hiving off the bad investments, and sticking shareholders and executives with the losses. In other words, he advocates eliminating the current moral hazard and disincentives to lend while reinstating accountability.
Right now, the zombie banks are murdering markets and capitalism itself. Time for a new escape plan.