One administration official sighs in the presence of Ezra Klein
Ezra Klein has been talking to anonymous administration officials. And they explain why they don't want to nationalize the banks. I link, you decide.
...The trouble is that the government doesn't know how to price anything. So if you want prices, you need private investors. And if you want private investors, you need to overcome the skittishness that's taken hold of the markets. And if you want to overcome the skittishness that's taken hold of private investors, you need a deal that they virtually cannot refuse. This is that deal. In its terms, it's all private upside and public downside. But even if the public downside here is more galling than is something like nationalization, it's not actually bigger. Quite the opposite.
"Many of the critics," one official sighed to me, "are underestimating the difficulty of their counterfactuals." Ben Bernanke does not appear to think the administration has the legal authority to forcibly take investment banks into receivership. What happens if a legal challenge disrupts the process?...
...So the Geithner plan is really two bets in one. The first is that this is not the worst case scenario and does not require the fixes developed for the worst case scenario. The second is that if this turns out to be the worst case scenario, then we still have those fixes available to us, and the need is clarified among the actors -- like Congress and the market -- whose reaction in the absence of consensus could scotch the whole thing.
Personally, I think the government does know how to price at least some of the liabilities that we're given to understand are at stake: nada.