Last Labor Day, the thought of nationalizing banks was alien, if not seditious. Today, some argue for bank expropriation. Bafflingly, this advice comes not from Communists, but from Republicans.
“It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring,” former Federal Reserve chairman Alan Greenspan
said in Wednesday’s
Financial Times. This would “allow the government to transfer toxic assets to a bad bank without the problem of how to price them.” Greenspan, whose monetary bubble elevated the economy to the vertiginous heights from which it is tumbling, seems old enough to understand that banking without the “problem” of prices is like flying without the “problem” of altimeters.
Why do newspapers still seek this man’s counsel?
For Sen. Lindsey Graham (R., S.C.), mere practicality trumps free-market principle. “We should be focusing on what works,” Graham chirped to the
FT. “If nationalization is what works, then we should do it.” Graham
claimed that many GOP senators — including former Republican presidential nominee John McCain — want nationalization “on the table.”
The idea of government commandeering banks is nothing new. It appeared in 1848 in
The Communist Manifesto.
“The Proletariat will use its political supremacy, to wrest, by degrees, all capital from the bourgeoisie,” Karl Marx predicted. This would include “Centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.”
While Marx’s proposal exceeded the ambitions of Greenspan, Graham, and Graham’s GOP pals, it took liberal Democrats to declare bank nationalization out of bounds.
“We have a financial system that is run by private shareholders, managed by private institutions, and we’d like to do our best to preserve that system,”
said Treasury Secretary Timothy Geithner.
“I would not be for nationalizing,” said Sen. Charles Schumer (D., N.Y.) as he moved to the right of these Republicans. “I think government’s not good at making these decisions as to who gets loans and how this happens.”
Rather than parrot Karl Marx, Greenspan, Graham, and other Republicans who have wandered off the ranch, Republicans should offer radical ideas — from the right. Why not help this wobbly industry by declaring a five-year federal tax holiday on banks? Let bankers improve their bottom lines and lend to worthy borrowers without worrying about the 35-percent corporate tax. Would that cost the Treasury tax revenue? Yes, but since Washington no longer checks price tags, why not try something that actually would stimulate rather than enslave banks? Improved economic growth and consequent decreases in government assistance could make this policy revenue positive.
Also, economist Allen Sinai estimates that some $1 trillion languishes offshore, enervated by America’s high corporate and personal-income taxes. Why not welcome this capital home until December 31 — tax free, no penalties, no questions asked? It will create more jobs here than in Zurich.
The Senate on February 3 defeated an amendment by John Ensign (R., Nev.) and Barbara Boxer (D., Calif.) that would have allowed this money to be repatriated at a very attractive 5.25 percent tax rate. Of the $1 trillion out there, Sinai forecasts that $545 billion would return to America. That sum is equal to nearly 70 percent of the $787-billion spending bill that President Obama signed Tuesday. Surely, $545 billion would boost growth and employment.
In their
book, Global Tax Revolution, the Cato Institute’s Chris Edwards and Dan Mitchell report that a 2004 repatriation program targeted the $800 billion in U.S. assets then afloat overseas. That year, some $300 billion flowed back into the United States. “Intel Corporation repatriated $6 billion,” they wrote, “which helped it finance construction of a new facility in Arizona.”
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