Posted by
Philip Mella on Monday, February 23, 2009 2:48:14 PM
Beyond the obvious arguments for and against the nationalization of our banking system is the deeper question of implicit trust: To wit, on balance, do you feel the government is more trustworthy than private corporations when it comes to operating our banking system? A corollary is whether you feel government is more proficient and reliable than private corporations in operating large, complex business systems?
Making the case that government can't be trusted is Gerald P. O'Driscoll, Jr., writing in today's Wall Street Journal. He outlines the central concerns with nationalization, but the most sweeping and credible charge is that the process would be rife with politics, not unlike the so-called 'stimulus' package. We can ask such questions, as Mr. O'Driscoll does, such as whether a government-owned bank would act with fiscal prudence and follow sound business practices, which is highly dubious.
But, more fundamentally, there is simply no reason to believe that politicians and bureaucrats can be trusted to remain dispassionate about this because both sides of the aisle, but, in particular, the Democrats, have a rich history of exploiting such problems to their political advantage.
Arguing in favor of nationalization is Raymond J. Learsy, in a piece in today's Huffington Post. Ironically, he uses the notion of trust to support his argument for nationalization, that regardless of the billions already pumped into the banking system, consumers have lost trust, because of a lack of transparency:
Neither we, nor the government fully understand what the banks are doing with the funds showered upon them by the TARP agency. Most damaging is the almost universal lack of confidence in the competence and integrity of these tone-deaf managements who have clearly gotten us into this mess.
Well, have we forgotten that it was the government who wrote the rules for acceptance of the funds the first time around? If transparency and operational credibility are lacking it's because the same group of government bureaucrats who wants to nationalize the banks were dozing at the helm when billions were showered on them the first time around. So, speaking of trust, why should the average tax payer have faith in them given their checkered past?
As for Learsy's argument that we can't infuse more capital into banks "without control over the sad sacks who got us into this mess is lunacy," we would be guilty of intellectual dishonesty if we denied that the group of "sad sacks" must include certain members of Congress, many of whom are elbowing one another to the microphone to argue for nationalization.
Somehow, we're supposed to sleep soundly knowing that Learsy's band of bureaucrats will exercise cutting edge business acumen while those who do it for a living won't. However, keeping the banking system private doesn't mean allowing the executives an unregulated operating hand in decision making. Let the bureaucrats do what they do best, which is to draft Draconian regulations that Congress will hopefully retool to allow banks to maximize profits without risking reserves.
But, Learsy is correct that trust is the issue on which all of this rests: Do we trust those in government, from Congress, which sat idly by as this storm developed to the bureaucrats at our regulatory agencies, who seem to awaken from their civil service slumber just in time to overlook another impending crisis?
Or do we trust those in the industry who, with a measure of meaningful regulation, can right their own fiscal ship with far more confidence and credibility?