Nationalization: Terrible but inevitable

By J Saft
January 23, 2009

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

Nationalization of weak banks in Britain and the United States may be preferable to current plans for insurance and soft “bad banks” schemes which risk being swamped by future losses as assets, especially real estate, continue to crater.

An insurance program, getting banks to identify their riskiest assets to the government which will insure them for a fee, is one of the main planks of a UK plan to bail out banks unveiled this week.

Both Citigroup and Bank of America have already received loss protection arrangements from the government. The betting is now that the United States will opt for some sort of a “bad bank” aggregator which will buy up doubtful assets from banks, with the emphasis on keeping as many as possible operating as publicly traded entities which, once shorn of their bad debts, would be viable and would lend.

Both plans keep banks in private hands, which is desirable, and insurance especially is attractive because it has a relatively low upfront cost. But both, and especially insurance, run a real risk of being too small and, by definition, only ridding the banks of assets that are bad now leaving them to founder on new bad loans later.

Commercial and residential real estate in both countries continues to head south at an alarming rate, with falls of as much as 20 percent or more possible in 2009. Those falls won’t be stopped by current lending programs; it is an ongoing crash that could probably be stopped only by some sort of economy-wide debt writedown which is very unlikely.

That means that we could find ourselves in six or nine months in exactly the same situation, but with banks crippled by a new wave of defaults and with the non-financial economy in a much worse state.

In other words, in order to work a bad bank plan must take into state control the weakest banks and probably needs to err on the side of taking the doubtful down along with the basket cases.

“They should probably nationalize now, but not blanket nationalization,” said George Magnus, senior economic adviser to UBS.

“It is by far the cleaner option, take on all the assets and take on all the liabilities and if you find out that in six months time commercial real estate, for example, has dropped 20 percent it is far less of a shock. You don’t have to treat it as a private vehicle which has to be viable.

“Sell the good bits recapitalized back to the market and you can have viable banks far more quickly.”

DEFINING FAILURE

Consultancy Capital Economics is predicting that British house prices will fall another 20 percent in 2009 and that land values contract by 70 percent peak to trough. British commercial property fell 27 percent last year and analysts in December were forecasting an another 16 percent fall this year. Goldman Sachs economist Jan Hatzius believes the U.S. Case-Shiller 20 City index will fall another 20-25 percent by the third quarter of 2010.

Nationalization is not a good outcome; it is failure defined in a word. And nationalizing banks raises the problem of re-privatizing. Who will want to buy banks from a government with a recent track record of what some will inevitably term confiscation? But few would commit capital to banking now, given that governments have been unable to explain how they will treat capital in the banking system.

If banks are to be taken into state control, there needs to be a process to deal with the rights of shareholders; any bank that stays in state control needs to be run at arm’s length; and the period it stays in state control should be as short as possible.

Easy to say, tough to do and no doubt nationalization will have its disasters.

Bank shares have fallen at an appalling rate on both sides of the Atlantic, with several UK banks trading as if they are in danger of being taken into state control. Royal Bank of Scotland, in which the government already has a 70 percent stake, has lost almost 80 percent of its value in January, while Barclays and Lloyds Plc have fallen precipitously. In the United States, Citigroup has more than halved in value in the month despite equity infusions from the government and an insurance wrapper on some of its assets.

But here is where things differ markedly between the United States and Britain. Britain may well need to do more for its banking system than the U.S. and sadly is less well placed to carry it off without nasty side effects.

The dollar is the world’s reserve currency, allowing the United States more leeway in financing its liabilities, and U.S. banks are smaller as compared to their economy. We’ve already seen sterling falling sharply and you can expect further falls as risk is transferred from the private sector to the state.

– At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. For previous columns by James Saft, click here. –

31 comments

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whatever may happen,no other british bank will be nationalised.remember this

Posted by a rawlley | Report as abusive

Nationalizing the banks will not stop the free-fall, because right up until that happens the titans of the financial industry (that is,the greatest pirates in history)will continue to pad their personal accounts and those of all the witnesses right up and until the bankruptcy of the nation. These guys need to be arrested now and their ill-gotten gains confiscated. This is what we do with other big-time criminals like narco-traffickers why not with hyper-fraudsters? That loud sucking sound is very close now, only we are the ones being flushed!

Posted by Jonathan Cole | Report as abusive

When banks lend for real estate, they are lending depositor’s money. The banks capital is the ‘cushion’ that is supposed to absorb any losses. Unfortunately, our current situation overwhelms the ability of most banks to cover the losses.

We (in the USA) have Freddie Mac and Fannie Mae, Federal Government Agencies that also make real estate loans. Why don’t we develop a program where Freddie Mac and Fannie Mae buy any loan from a bank but at a healthy discount, which results in both the bank and government sharing in any ultimate losses? Set the discount so most banks will survive this crisis but do not turn all bank employees into Federal Government employees by nationalization.

Roger

Posted by Roger Sparks | Report as abusive

World financial markets, and world economies have, over the last few decades, and particularly for the last few years preceding the collapse, massively over-leveraged at all levels. There is still, understandably, a tendency to attempt to ‘save’ or ‘preserve’ a structure that, basically, no longer exists.
The question that remains, then, is how to mitigate, to whatever degree may be possible, the collateral damage of massive world-wide deleveraging, centered in the financial markets, while accepting that the fact and the process of massive de-leveraging is in fact inevitable.
In my judgement the various ‘bad bank’ notions are yet another attempt to finesse the problem in the name of managing the problem. The selection of those assets to be placed in ‘bad banks’ and their valuation is problematic in the extreme, and is contemplated only in the delusion that by so doing, and socializing a significant portion of de-leveraging assets in this fashion, the existing structures may on the whole be preserved.
We are witnessing, in various forms and in various guises, the socialization of the losses only now being partially acknowledged.
The fact of the matter, for example, is that much of the ‘value’ to which individuals and institutions still cling in real estate and other assets no longer exists. Similarly, much of the ‘value’ that shareholders place in their investments in bank stocks, etc, no longer exists. What remains is a marginal speculative play on what may survive in certain circumstances if the losses are socialized via government action and the action takes such form as to ‘preserve’ some portion of the shareholders equity.
To the extent such delusions are accepted they will prolong the process. They will not, however, significantly affect the fundamentals of the process and are, therefore, marginal decisions at best, however much we inevitably focus on their ‘importance’.
I would argue that, to the extent possible, it is best simply to do what may be possible to structure the recognition of de fact losses as efficiently as possible. Rather, for example, than let an institution, of whatever scale, be ‘saved’ it would be better to address the matter forthrightly. If the institution is, in fact, effectively bankrupt, ie, no longer able to function without government protection, that protection ought take the form of bankruptcy. if existing shareholders are wiped out, that is simply recognition of fact. If, in bankruptcy, the government continues to oversee the operation of the institution, it may attempt to do what is fair and appropriate for larger financial considerations and to mitigate, to the extent possible, systemic dysfunction.
I would point out, to those who may argue that recognition of bankruptcy would entail systemic dysfunction, that we are, in fact, already in such a state. The question is not whether or not it can be avoided.
We have seen quite enough, I think, of delusion and rationalization, though, given humen nature, we are likely to see a great deal more still to come.
The ‘bad bank’ notion is a bad one. It involves an infinite amount of vaguery, delusional, and wishful thinking, all wrapped in a rationalized package. If Bank X is bankrupt, it is bankrupt. To pretend it may be ‘saved’ is the classic delusion of any investor who has made a bad investment.
It is time to put aside childish notions of ‘saving’ what is unsalvageable, proceed to write down in an orderly and rational fashion, and see what may be built from what remains.
Some things will, in fact, remain, and some things may, in fact, be learned.
At least for a while …

Posted by Big Al | Report as abusive

Is nationalization the right word for what the bailouts really are? They have been described as loans with stocks in the failing institutions serving as collateral for the Federal help. The Banking firms that have been aided and the auto companies that have received massive loans are expected to repay the loans.

A real nationalization of banking would turn some banks into public employees. But it might never actually buy all of them.

Banks are now too important to fail. Few people can live without one or more of their services. If they were going to be nationalized like the OPEC countries did to their oil industry – and until the Thatcher years in Britain – the public utilities – the country would still have small private banks, S&Ls and credit unions that were private. A truly nationalized bank would be the kind of stable institution that Treasury debt has been so far. Wouldn’t it? I don’t care if my neighbor the banker gets rich. I want money available as a public utility at the lowest cost possible to me the consumer.

The Federal Reserve system is the banker for bankers but wouldn’t it be the ultimate super banking system that the government would create by making a Federally insured banking system for the general public possibly with no upper limit on insured deposits? And that really isn’t what the buy up of distressed banks by those banks that received bailout help are doing now.

A federally owned bank system would be regulated directly by the government. Executive and employee compensation would be determined by statute and it would be in a position to drive all private banks into extinction or certainly to reign in their “irrational exuberance”. They could be used to encourage all sorts of social programs from micro loans, (not usually done here but who knows how slender our future might become) low income loans, even a line of credit card debt, that could alter the way all private banks offer those same services. With a nationalized bank we would not have to wait two more years before loan sharking by credit cards banks became illegal. Since local taxation to finance low-income housing is not popular and must rely on federal and state aid, a national banker could lend directly at very agreeable terms.

If there had been a truly nationalized banking system that offered the definitive line of consumer credit perhaps there would be no credit crunch? There may not have been excessive speculation in mortgages either. All other private credit companies would have to follow. It would be a tool to compete with and thoroughly control all practical banking services that are so much in question now.

And like nationalized health – the government system would probably still live with a more exclusive or specialized private banking system.

If that’s what nationalization of the banks system could do why not? The bailouts are not even trying to do that. They are merely hoping to give private banking a sense of security to go on doing the same old same old.

Posted by P.Rosa | Report as abusive

You pretend that the toxic assets don’t exists on the banks’ balancesheets, but everybody already knows that the world banking system is insolvent. Pretend all you want, move the toxic waste from account to account, frop program to program, but it will solve nothing. This meddling by the government into the free market mechanism will only prolong the economic slump caused by too much lending/borrowing, incompetent management practices, outright fraud, insolvency, overcapacity and malinvestment. Until savers are rewarded with attractive rates and the bad debts are liquidated we will not see the end to this crisis. Mark my word.

“if banks are to be taken into state control, there needs to be a process to deal with the rights of shareholders;”

Actually, no. Shareholder always run a risk that they might loose their investment, when the company they invested in goes down, and they know that.
Shareholders will just be wiped out here – this is not the ordinary takeover or M&A were you buy a failing company to prop it up to make a profit. Here we are trying to save the economy which is of vital importance to a nation. The financial industry is dead, and so is capitalism. Let’s make sure that they don’t drag down democracy while their going down.

Posted by Robynne | Report as abusive

I am scared for the economy! I don’t think anybody has any answers. people need tobe accountable for there own actions and not live beyond there means!!!!!!!!!

Well if we selectively nationalize banks it will also work against their survival since there will probably be a run of capital to banks which remain solvent and outside government control.

That is unless the government does something to hold onto customers, which plays into a second point I would like to make.

If one wants to nationalize something, or heavily inject public policy into business, e.g. proposed automaker bailouts, then one opens the door for bureaucrats to be involved in business operations. This means that policy may be implemented which works against what markets would move toward, and that if one wants to return to “free” markets in the future one is just delaying an inevitable adjustment.

For instance right now banks are hording the funds they get from the government, because they are anticipating more losses. Bureaucrats would prefer to see them lend these out to stimulate economic activity. The banks action is prudent, the bureaucrats would be foolish, building a recovery on debt in the face of weak underlying dynamics isn’t the way to build a recovery.

Point being you nationalize the banks, fine do so, but realize that once you start down the road to heavily injecting public policy into business it may be more difficult to move back to free markets. Accept that increased policy intervention may become chronic.

It is very difficult to say whether Nationalisation is better than the half hearted piece meal approach of taking toxic debts off Bank books. No one seems to know the true value of the Assets in the Banks books and in the coming months which other debts too may go bad. Theoretically all the Banks are Bankrupt because the value of Assets to be written off is greater than the Equity Capital and free Reserves. The Market Price of most Bank stocks reflects this reality.

Banking needs far greater Government Regulation and oversight than any other sector. It is a failure of Governance. The much larger failure is of Bank employees. Employees who do not have the skills or aptitude to evaluate RISK should never be employed in Finance, leave aside Banks. A financial intermediary like Banks should ideally have at least 5% staff strength in Risk Management, which does not seem to have been the case. Lastly, why on earth were Insurance Companies writing cover for Financial garbage? Ideally only hard Assets should be covered by Insurance.

Low Interest rates was the primary culprit that forced individuals and Institutions to take unbearable Risks. We do not seem to have learnt any lessons at all. The measures being taken by most Central Banks does not address the roots of the problem, they are simply postponing today’s problems to tomorrow.

Posted by F.Daruwala | Report as abusive

Rather than simply bail out the banks by covering current losses, surely it would be better for taxpayers if the goverment took control of these institutions so there would be some balance to the whole thing.

One has to wonder how many times the bail-out card clause would work for the bank CEOs who should have been held responsible all along

Posted by Anne | Report as abusive

James is correct, nationalising the banks is the only way to go.

Posted by Greg | Report as abusive

It’s time we stop teaching our children about the constitution and freedom. Land of the free? And the home of the brave? Hardly the case these days.

Posted by jason | Report as abusive

The nationalization of the U.S. Banking system is in my view an outgrowth of the FDIC and the Federal Reserve. The”Big Idea” seems to be inflate currency to fight deflation. The question to be answered is will this last bubble put off the inevitable or buffer the current economic free fall?

No less than the very existence of industrial societies and the capitalist economic system depend upon the path decision makers of 1st world nations lead us down. Civilization is at a great precipice. We can enter a new age of far reaching prosperity or descend into the next dark age. The notion that any one specific policy in banking, fiscal stimulus, taxation, environment or trade will set the economy back on course would be naive. In fact, very sound decisions will have to be made in all of these areas of human activity in order to achieve any lasting success.

I always keep my hopes up and my expectations low. I also believe the experts like to complicate things and are insular in their ivory towers. That is why we, the common people should not rest with our vote but continue our civic duty to give all our public servants an earful on all matters. Isn’t that what they get payed for? Besides it is all of us that governments are supposed to work for, not large corporations and the wealthy.

Posted by Anubis | Report as abusive

Gregory’s Bank of England Special Liquidity Scheme blogspot:

http://bankofenglandsspecialliquiditysch eme.blogspot.com

Posted by Gregory | Report as abusive

Reorganize the banks into utility companies. As legal monopolies their rates, business pratices and profit margins would be set by state(USA) utility commissions.

Posted by Robert Jarvis | Report as abusive

I think a number of good points have been made. A critical one made by many with which I’m certainly in agreement is that the ‘bad bank’ idea is a dubious one at best given the inability to place reasonably accurate valuation on the assets to be sequestered under government aegis. Another, it seems to me, is the reminder that it appears at present that many if not all of the largest institutions are effectively bankrupt at present and the various schemes mooted to promote overall financial stability tend to avoid the acknowledgement of this relatively plain fact. Another, made by a number of folks, is that we are looking at the end of capitalism as we’ve known it, no matter what course or courses is/are followed.
Personally, I’m inclined to a course which would attempt to manage the fact of the bankruptcy of these large institutions, accept that in most cases the shareholders have already been wiped out, and place them in formal bankruptcy. I see no need for the government to nationalize them in the sense of placing civil servants in charge of operations, but, rather, to acknowledge that they are, in fact, bankrupt, and that the government is now in the position of sole shareholder.
The ultimate goal, I think, is to write down the bad debts rather than engage in wishful thinking as to ‘saving’ them or a substantial portion, and to ultimately break the banks up. I suspect that in future it may simply be undesirable under new, more stringent forms of regulation, to allow a handful of institutions to control something on the order of 50% of finance, as had been the case. This is a fundamental dilemma of capitalism, of course, in that it seems to work best when there are a large number of competitors, and none are deemed ‘too big to fail’, yet clearly in some industries that model isn’t appropriate–it’s difficult to imagine having a thousand auto manufacturers, airframe makers, etc.
So I don’t claim to have ‘the answers’ here.
I do think, though, that we ought, as a first step in attempting to find our ways through a transition of the form of capitalism, to acknowledge that bankrupt institutions are in fact bankrupt, place them under trusteeship, and seek to sort out the problems in that form rather than via the previous/present essentially delusional notions that things may be ‘saved’.

Posted by Big Al | Report as abusive

How can the headline get changed from “a necessary evil” to “terrible but inevitable”? Because they mean quite different things.

If that is how the community of bankers plays with the English language it is no surprise that they, in their greed, bring misery to billions of people.

Nationalisation is not evil but it can be terrible and also a good thing to do!

Banks have never made a product but they convinced themselves and greedy people that they could. When the economy begins to run out of people to lend to the banks seem to resort to a glorified pyramid scheme, in which the masses inevitable lose.

Posted by Robin Turner | Report as abusive

THERE ARE TWO THINGS YOU SHOULD NEVER SEE IN YOUR LIFETIME….HOW THE MEAT INDUSTRY MAKES ITS SAUSAGE AND HOW THE AMERICAN BANKER MAKES HIS DAILY BREAD!

Posted by LOUIS WOOLF | Report as abusive

Economic liberaliztion, as a concept, has been fallen since September 2008. This fall looks like the fall of communism in 1989. William Alonso,in his book with John Friedman in 1961 (eds.), when he wrote about “location theory” has demonstrated how much the state presence in the market is a must. THE STATE PRESENCE IN THE MARKET IS A MUST.

Posted by Tarek Abou-Zekry | Report as abusive

Thanks to the excesses of Capitalism and the unfortunate greed which was loosened to the extreme under Bush the WORLD will have to experience the new methods: Democrat – Socialism. We got caught with the hand in the cookie jar…..and we are still not letting go…..of few cookies. Helas!…means Hell on us.
Colonialism has been over for a while and still look at the existing colonies of the world!

Posted by Uri Tischer | Report as abusive

Is it just me but does the idea of senior economists, and bankers advising the governments to bail out the banks seem a bit like a mugger asking their victim to give them a hand?
Where did Tony go before all this happened? I’m sure it wouldn’t have happened if he was still PM… after all look at the peaceful results he has achieved in his new role in the ”Middle East”.

Posted by Peter H | Report as abusive

The fact is that at least Citi and BA are insolvent. Either nationalize and warehouse the bad assets or have the FDIC put them in bankruptcy. Anything other than those two options is just going to dither while the economy sinks deeper and longer into recession because it has a dysfunctional financial system.

I prefer nationalization because it’s quicker and because it’s cheaper. The American taxpayer already owns both of these companies via earlier injections. Enough already. The taxpayer doesn’t need to spend another nickel protecting equity investors especially, and cash flow even from warehoused assets can be applied to bond holders in the normal descending order. But once the cash flow is exhausted, the payments stop.

On second thought, if bondholders cannot provide enough capital to make the bank solvent once illiquid assets are warehoused, then take them out along with equity.

Once warehoused, the illiquid securities can be sold, if there’s any market for them. And the taxpayer gets paid back first. If there’s any money left over, then that can be applied as relief for current bondholders in the normal descending fashion.

“Once again, recall the story of banks hiding explosive risk in their portfolios. It is not a good idea to trust corporations with matters such as rare events b ecause the performance of these executives is not ob servable on a short-term basis and they will game the system by showing good performance so they can get their yearly bonus. The Achilles’ heel of capitalism is that if you make corporations compete, it is sometimes the one that is most exposed to the Black Swan that will appear to be the most fit for survival.” From Nicholas Taleb’s best seller, “Black Swan.”

Nationalize first, warehouse. Take your sweet time at the warehouse. Then recapitalize if it is still desired to do so. And what in recent history, for heaven’s sake, would make anyone choose the current bank management?

I would approach the matter in a similar fashion to Beezer. I object to the ‘bad bank’ warehousing notion when it is floated as an idea to ‘save’ the situation, but I agree it makes good sense to isolate and warehouse the toxicity in the course of bankruptcy or nationalization. I do not see nationalization as the ultimate goal here, but a necessary step to address the immediate situation.

Posted by Big Al | Report as abusive

A lot of the issue revolves around the function of banks. Such institutions are not a public service- there is (obviously) a profit motive. Nationalised banks will expect another bubble market into which to sell risky assets- and the ‘greater fool’argument will only hold up in a forever balloning macro-economic environment. If the banks were prepared to take on risky assets and are the victims of en-masse defaults then they must pay the price of failure by disappearing off of the financial radar. There is no real reason why default ratios should disappear! The only sure way to prevent this happening again is (alas) through regulation. If the government has a fiducial obligation to protect the economy for all citizens some areas in the markets must be ringfenced.

Posted by marky pringle | Report as abusive

I agree with you Robynne…this is not a matter of a few banks or financial institutions, it is the majority of the major players and we are talking about our economy, the global economy and our future. How much money are we willing to keep injecting into these banks that are supposed to be lending to the small business sector, private investors, and each other. The small business sector, which is seriously suffering enough as it is, cannot get loans from these banks that will not lend but instead decides to go out and buy another failed institution instead of trying to figure out what happened to their own first. Or maybe they decide to go spend $50 million on a brand new plane, when the bank already has a fleet of them and is not lending but hoarding the funds they received from the Government. And why is the Government not holding them liable for what they spend the money on and how they spend these billions of dollars they are receiving. We, the taxpayers, who eventually have to pay it all back unless the Government returns a profit from “investing” in these failed institutions but in that case we will still end up paying it back in the long run.

I hate to see banks nationalised, but given the current situation the economy is in, it might be something really worth thinking about. At least if the Government nationalised the banks, they would lend to companies that need help right now in order to stay in business, otherwise they will go under which will result in higher losses of unemployment. You might consider, making some amends to shareholders of these banks if you were to nationalise any but as Robynne stated, they run that risk. You never heard them complaining when they were getting large returns, what you heard was less regulation please, and unfortunately our government gave it to them. Now we are facing a situation unlike any of us have seen in this lifetime…globally…maybe not yet but if we don’t make the right decisions now to turn the global economy around, what’s happening right now will be nothing in 5-10 years or less. We need action and we need not be afraid of what these large corporations and banks have to say. We need to stop letting them influence world leaders and decision makers in order to keep lining their pockets.

Posted by Damian Palmares | Report as abusive

They will take this country down with them if we don’t do something about it now. If our economy really tanks…close to the Great Depression levels or worse, what do you think will happen to the rest of the countries of this world who rely on our trade? It’s already starting to show in reductions in GDP and trade surplus from China and other countries. Let’s nip this one before it really gets out of hand and we are there scratching our heads in 5 years from now, thinking hmmmm, maybe nationalising some of these banks might not have been a bad idea after all.

Posted by Damian Palmares | Report as abusive

Capitalism does not have “excesses”. Capitalism is a system that allows individuals to persue their own best interests. Capitalism assumes that self interest in the long term will enforce a measure of honesty. Eventually it does. Madhoff’s time did finally come.

The only regulation required in a capitalist economy is the enforcement of honest disclosure upfront.

If Madhoff told A “give me your money and I’ll give you more money when I can get B to give me some money”, and “I’ll give both A and B more money when I can persuade C, D and E to give me money”, how many of you would line up to F, G, H, and I?

Capitalism (private ownership) is the only means to prevent a tyranny of experts.

The tyanny of experts (Socialism) brought Russia and endless series of 5 year plans that failed miserably. Resulting in institutional poverty ruled by an iron fist of the state.

Chinese Communists ended years of the same economic stagnation by allowing a measure of economic freedom.

Experts brought us Enron, WorldCom, Madhoff, and a host of other “you are too stupid to understand, so trust me” so called experts. Experts brought us the brillant idea that $5.00 Ethanol blended with $4.00 gasoline would save us money.

Capitalism is a system of behaviorial principals founded in individual freedoms. Capitalism does not have excesses. It assumes ready access to information. Insuring that access is the only thing governments need to do to keep the wheels on.

People fail when they abandon long term prinicpals for short term gain.

Posted by Vance | Report as abusive

MY SEVEN STEPS TO SAVING AMERICA

Taking toxic waste (In this case loans that are never going to be paid) and moving that waste to another county (in this case the US Treasury), then shipping it back 5 years later to the county it came from miraculously making potable soil is irresponsible dreaming!

STEP 1 (STOP FEEDING THE LIES)
The first thing that the President can do is stop the phoney-baloney that the Treasury Secretary, Federal Reserve Chairman, and people of the ilk of Robert Rubin, and the Media Like the New York Times are serving up to the public. ALL OF IT to date is complete and utter hogwash. The public can smell a rotten egg and if Obama doesn\’t come to terms with that fact quickly, then he will not spend more than one short term in office.

STEP 2 (BECOME REALISTIC)
All of this nonsense about the Government taking the failed debts of the banks \”temporarily\” to be repaid later is an effort to hide the fact that the Plutocracy of America is more important than the rest of the American People and as they all run for cover the rest of us will be left holding nothing.

STEP 3 (STOP PRINTING MONEY)
As the Goverment continues to print new currency at an alarming rate (that I might add is no longer reported due to M3 no longer being published), we risk Weimarian inflation. We will be carrying 100 Billion US Dollar Notes in the next 5 years at the current rate of inflationary dollar creation.

STEP 4(REVITALIZE MODERN FED.RES.GOLD CERT. RATIO)
There is no solution to the current financial problem that we face, other than creating \”The Revitalized and Modernized Federal Reserve Gold Certificate Ratio\” as per Sinclair.

STEP 5 (HIRE RON PAUL AS SPECIAL ADVISER)
Obama should also make Ron Paul his Special Advisor to work with Volker.

STEP 6 TELL THE ENTIRE COUNTRY THE ABOVE AND EXPLAIN TO THEM WHY IT IS NECESSARY.

Let the Bankers and the Motor companies and any other company that has failed, to fail. Then you will have the trust of the people and other Nations.

STEP 7 (USE THE BIBLE AS YOUR GUIDE)

That’s my solution and it will work if Obama tries it.

Posted by McGregor | Report as abusive