- The Washington Times - Sunday, February 22, 2009


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.” Mr. 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, South Carolina Republican, mere practicality trumps free-market principle.

“We should be focusing on what works,” Mr. Graham chirped to the Financial Times. “If nationalization is what works, then we should do it.” Mr. 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 Messrs. 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, New York Democrat, as he moved 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, Alan Greenspan, Lindsey Graham and other Republicans who have wandered off the ranch, conservatives 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, some $1 trillion languishes offshore, enervated by America’s high corporate and 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.

How did America sink so low as to witness Republican calls for bank confiscation?

As late as last summer, this economy was a virgin to nationalization. One of the most repugnant facets of former President Bush’s malodorous legacy is that he stole America’s chastity on nationalization. Mr. Bush used taxpayer dollars to buy 79.9 percent of insurer AIG. He fully absorbed Fannie Mae and Freddie Mac into the state. The GM and Chrysler bailout - killed by the Senate, but autocratically imposed by Mr. Bush anyway - is turning these auto companies into de facto federal agencies. Rather than the car czar who Mr. Bush envisioned, an Obama-appointed automotive politburo will steer GM and Chrysler into the sunset.

Regarding nationalization, America’s free market has devolved in a half-year from unsullied maiden to street-corner whore. This sad truth is one more reason for the American right to repudiate the Bush-Rove-Paulson borrow-spend-and-bailout model and its architects, as if severing and discarding an infected appendix.

That prominent Republicans must be reminded of these fundamentals confirms just how grim things have grown. As the song says: “Breathe deep the gathering gloom. …”

Deroy Murdock is a columnist with the Scripps Howard News Service and a media fellow with Stanford University’s Hoover Institution.

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