NOURIEL ROUBINI, the New York University economist whose Cassandra-like warnings about the impact of the credit crisis should have been heeded, says radical step swill be needed, including government capitalization of the banking system.
The government will have to arrange “triage” to decide which banks are solvent and able to survive,Roubini said on a conference call last week. Those that survive will receive an injection of equity. Deposits of all banks, including those allowed to fail, will have to be insured by the government, he added.
To the Bank Credit Analyst,the $700 billion rescue plan represents “the effective socialization of financial intermediation.” With increased government capital will come increased oversight.
It least the Bank Credit Analyst understand what many of us have been saying about this giveaway—it is the socialization of risk for capitalists.
Meanwhile, if you’re having problems paying your mortgage, don’t expect Uncle Sam to help you anytime soon.