Clark's take on the partial nationalization of banks on clarkhoward.com

For several days, Clark couldn't work because he had a bad case of laryngitis. He came down sick just as our government did a partial nationalization of the 9 largest U.S. banks…and he was mute. Talk about torture!

Many of you have gotten down on the penny-pincher about his belief that the partial nationalization was the right move. In fact, he believes that it was wise of the feds to require that the banks take the bailout instead of making it voluntary.

One benefit of the move is that traditional non-interest bearing business checking accounts -- the kind favored by small and midsized businesses -- will now be covered up to an unlimited sum of money.

Of course, this partial nationalization is not like waving a magic wand that will make everything better. But if it encourages lending to businesses that can in turn make profits, that's a good thing.

Yes, there is an irony in the fact that right now we've got to be socialists to be capitalists. But in retrospect, Clark believes this will be seen as a good move. He is worried, however, that we'll forget about this episode of American history too soon. If we learn anything from all of this, it should be that we need more cops on the beat to protect us from the excesses of capitalism.

What others are saying

Unlimited currency panacea.
You don't have to go back to the 1930's Germany to see what runaway inflation looks like just look to Zimbabwe today. I fear there will be a massive increase in inflation as more dollars get printed and imports slow to a trickle. How long will the world accept US Dollars when they are worth less then the cotton they are printed on?
By Robert @ 10/19/08 09:25:33 AMreport abuse
t. c. has the right idea
I think its a sound plan but it will never work because there is no room to hide hundreds of billions of pork for the people voting on it. It's too simplistic and most people including politicians could easily understand the concept...what would the writers of legaleeze and the economic gurus do without tons of room for loopholes and horribly complicated formulations to adhere to. lastly people like me would have to give up thier sarcasm.
By Dave @ 10/16/08 11:06:47 PMreport abuse
look in the mirror
More cops? We need more individual responsibilty. True, congress and the presidents helped create this mess, and then greed set in in the finance sector; but who was applying for credit they couldn't afford? And, who still lives beyond their means on the credit card. People need to start looking at what they absolutely need first, and then if they have a good emergency stash built up they should start looking at what they desire!
By me @ 10/16/08 09:27:00 PMreport abuse
Dear Frank
Interesting, I don't see how anything I proposed could be construed as expanding the powers of Federal government anymore than they are already being flexed. Of course your little diatribe seemed so full of anger and bitterness I don’t think you are prepared to consider anything with any degree of calm rationality.
To bad you didn't have a chance to deliver your views on government to Abraham Lincoln before he passed along that whole "by the people, for the people" concept.
Your concern for my financial issues is also much appreciated but I believe I'll be able to manage without such extreme measures. I posted the comment to search for solutions, not to just give up. In general, I don't think a mass run to declare bankruptcy is going to do our present economic situation any good.
Anyway thanks for the feedback, if anyone else has some input on my proposal (preferably constructive in nature, pro or con). I’m ready to listen.
By T. Crow @ 10/16/08 05:12:27 PMreport abuse
Economy Stuff
For those who would just let the banks fail and everything go to zero....are you ready for anarchy. Right now there are Chinese workers holding the Israeli managers hostage over a failed Lehman resort. This mess has just started and it is a WORLD CLASS MESS! I see the beginning as the Day Trader Greed mess, then the mortgage business mess. Wall Street is billowing because the greed never ends. Clark is right, we had to pump up the greedy banks or suffer a world collapse. It is not a case of socialism, it is a necessary action supported by the best financial minds in the world.
By Lindy @ 10/16/08 04:07:17 PMreport abuse
Un-frikken-believable!
T Crow said: "this plan provides a solution by allowing the government to assist the taxpayers (the very people our government is suppose to look out for)"

No T Crow, our government is not supposed to "look out for" us, if anything we should be looking out for the #@!% government. The U.S. Constitution was written to limit the powers of the federal government. Maybe you should read it some time.

As for your $70K predicament, that's really too bad. Instead of looking for someone else to feel sorry for you and for Uncle Sam to write a law that will "help" you, why don't you march your butt down to a bankruptcy attorney and get it over with right now?
By Frank @ 10/16/08 03:29:06 PMreport abuse
Here's a solution, I say "Let's do it"
Everybody would like solution for our economic troubles, here’s one and I’m pretty sure it will work. It involves:
(1) Creating a solution at the foundation of our economy,
(2) Restricting the ability of future poor financial judgment to undermine the solution
(3) Clearly defining the responsibilities and timeline for reimbursement of initial cost plus interest.

We implement a federal debt consolidation program at about 7% over an 8-10 year term. This pulls households out from under excessive credit/unsecured debt payments while still holding them accountable. (This is similar to the existing Student Loan program except the money would be paid directly to the lender and the credit account closed, the money would NOT be handed over to the individual)

Stipulation: Along with the consolidation of debt, the households would be legally held to strict credit/debt limits during the term of the loan. For example, each household could be allowed:
1 mortgage loan (no more than 6x Annual income)
1 autos loan (2 for joint filing households)
And a maximum credit limit of no more than 10% annual income

Those fine Americans who have been good custodians of their finances will not be held liable for mistakes of others, nor restricted in their financial capability. Meanwhile, the folks who have not been so responsible will have a chance to set their finances in order.

For example:
Consolidating my own credit/ loans equals 70K. Financed over 10 years at 7% equals $800/month as opposed to the $2,600/month I currently pay.

Advantages:
1. Immediate extra money available to be pushed into circulation at the consumer level for economic stimulus without resorting to a meager handout that most households would only use to pay a fraction of their credit payments.

2. The influx of funds from the payoffs, coupled with the loss of continual interest-fattened payments is likely to send banks into a lending frenzy, eliminating the credit and commercial paper freeze.

3. Instead of the socialist inclination from federal intervention in financial institutions, this plan provides a solution by allowing the government to assist the taxpayers (the very people our government is suppose to look out for)

4. While not directly affecting the overshadowing mortgage crisis, collateral relief would be found in households with the renewed capacity to afford mortgage payments.

Disadvantages:
1. People will almost assuredly begin looking for loopholes.
2. Developing enforcement of credit limits may prove complex but by no means impossible.

Probable initial cost: $1-1.2 Trillion, but it is not being leveled as a tax burden back onto the general populace and the plan for reimbursement is established with about $400 Billion of interest.

I’d like someone to show me a flaw in the logic or practical reason that makes this idea unfeasible. If you agree, I recommend we do something to make it happen. It would be a godsend to about 50% of the consumers in this country.
By T. Crow @ 10/16/08 12:22:03 PMreport abuse
Loony leftist prescriptions
Aristoggle said: "Perhaps it's time to get back to Keynesian economics. Let's spend some money on infrastructure, getting bridges and other stuff rebuilt"

That sounds all well and good, but what EXACTLY does the phrase "spend some money" mean? It means to allocate wealth as in human labor and materials we own outright. If we aren't allowed to borrow "money" for these grand schemes then we have to work with only what's available, or print some bogus paper "wealth", and that is the choice we face right now.

Printing (electronically these days) money does not increase wealth, it just makes the stuff we have available more expensive to buy. Germany in the '20s, Brazil in the '70s, Russia in the '90s, and recently Argentina all tried to print their way to a better economy. It did not work for them so why on Earth do people think it will somehow work for us?

Here is a tidbit that should sober some people's planning. The bank crisis in Iceland ended up costing about $500K per citizen when all of the bailouts needed to fix the system were added up. If it only costs half as much to fix the bank problems here in the U.S.A., 250K per citizen, we will need to set aside $75 TRILLION or about six years of GDP.

In other words we would have to all work and devote a huge portion of our labor and wealth for many, many years to solve the problems in the banking sector alone. Does anyone think this can actually happen?

Empires come and go, revolutions spring up, governments fall. We are not immune to history.

God help us in the coming years...
By Frank @ 10/16/08 12:19:43 PMreport abuse
Time to get back to Keynes?
Well, the trickle-down now seems to be working. All the pain is trickling down to us while the banks get bailed out. So much for voodoo economics.

Perhaps it's time to get back to Keynesian economics. Let's spend some money on infrastructure, getting bridges and other stuff rebuilt, and maybe build some infrastructure to start weaning us away from oil.

Get the money flowing for now ... and then stop when things turn around! Where have all the fiscal conservatives gone?
By aristoggle @ 10/16/08 09:52:16 AMreport abuse
Capitalism
QUOTE from a popular maganize published in 1980...

“In order to clear up the present economic problems everything must be set back to zero”

What will soon happen, then, is similar to what a Japanese businessman answered when asked about a solution to today’s economic turmoil. He remarked: “In order to clear up the present economic problems everything must be set back to zero.”

The possibility of today’s economic systems crashing has been a more frequent topic of discussion among economists lately. For instance, American financial commentator Sylvia Porter spoke of the real possibility of an “inflationary blowoff in this nation and the world, destroying the confidence in any investment in ‘paper’ [money], and so undermining the functioning of our international monetary system that trade among nations would grind to a near standstill.” The columnist added:

“The blowout would then ripple out to cause a rash of bankruptcies among businesses, a collapse of the dangerously swollen credit bubble, an upsurge in unemployment, foreclosures of vastly overextended mortgage credit, and repossessions of goods bought on installment loans the debtors could not repay.

“The scenario becomes more scary even as I write it.”

“Nations cannot go on borrowing to improve living standards”

Political commentator Jack Anderson similarly commented on the shaky money situation, stating:

“Nations cannot go on borrowing to improve living standards. The money can never be paid back unless it is invested in production instead of consumption. For many countries, the debt is already greater than they can absorb without a financial breakdown. . . .

“Skyrocketing prices keep adding to the bad debts until the whole banking system is threatened with collapse.”

The American Institute for Economic Research makes the following observations:

“During the next several years, the following economic developments seem highly probable:

“A severe and prolonged worldwide depression. . . .
By Mark P @ 10/16/08 09:12:07 AMreport abuse
dangerous error
There is one simple but extremely dangerous error being made by the man who is the world's greatest expert on the time period and economics of the Great Depression, Dr. Bernanke, Chairman of the Federal Reserve.

The Chairman is an expert on the history and consequences of that period. He is being guided by this deep knowledge, yet is totally oblivious to the consequences of the alternative actions he is taking to not make the same errors as the 30s. This is all in his attempt to prevent his president from going down in history along with other failed economic leaders.

The unprecedented creation of infinite dollars for the purpose of flooding the world's entire financial system is causing the birth an inflation of types unknown in a modern economy.

The test case for the CONSEQUENCES of present united central bank actions is the history of the Weimar Republic, but this time it is on a planetary basis.

CONSEQUENCES cannot be avoided by any means. They are economic equal and opposing forces. That is simple fact.

In an attempt to avoid what the Chairman see as consequences of incorrect central bank action in the 1929 - 1933 period, he is creating new and infinitely more dangerous, longer lasting, society changing, politically provocative new sets of unexpected economic CONSEQUENCES.

The only number that might compare to the nominal value of all OTC derivatives is a count of all the individual plankton in all the oceans of the world and then only maybe.

The world will never be the same because of the greed of these 29 year olds and the old goat bosses who sat at the long desk of the board of
By mark @ 10/15/08 09:57:04 PMreport abuse
It's been tried before
A couple of generations ago we had "strongman" leaders in Europe and Japan who nationalized industries and asked voters to give them unprecedented powers over the media, military, police, and civil liberties. It ended with tens of millions dead and entire continents in ruins.

Are we really stupid enough to fall for their sales pitch again?
By Terry @ 10/15/08 08:05:04 PMreport abuse
What Capitalism
"If we learn anything from all of this, it should be that we need more cops on the beat to protect us from the excesses of capitalism."

What "capitalism"?? We don't have real capitalism in America, and we haven't for a long time!! We have socialism and redistribution of wealth. With true capitalism without excessive government intervention, you have a motivator called FEAR! If you act unwisely, you lose and go out of business. But in our socialist society, if you are rich and act unwisely, you get bailed out by the government for the "good of the people/society." The government doesn't EARN anything, it only takes from some and gives to the preferred. The "cops" in capitalism should NOT be in Congress appropriating spending and collecting taxes, but in the Judicial branch prosecuting people who break laws and act unethically. The government can take what is not theirs and give it to someone else, but if an individual does that it is stealing! Hence, the government is the criminal here in our current "capitalist" country. So how can they be the "cops"?? What they are doing in nationializing these banks is unconstitutional, and I hope the executives of these banks take them to court on this rather than give in to their criminal behavior.

I am very disappointed in you Clark. I have listened to your show for quite a while, and you are great at consumer protection, but you lost me as a listener now that you promote socialism.
By Brian @ 10/15/08 05:50:46 PMreport abuse

Unlimited currency panacea.

You don't have to go back to the 1930's Germany to see what runaway inflation looks like just look to Zimbabwe today. I fear there will be a massive increase in inflation as more dollars get printed and imports slow to a trickle. How long will the world accept US Dollars when they are worth less then the cotton they are printed on?

By Robert @ 10/19/08 09:25:33 AMreport abuse

t. c. has the right idea

I think its a sound plan but it will never work because there is no room to hide hundreds of billions of pork for the people voting on it. It's too simplistic and most people including politicians could easily understand the concept...what would the writers of legaleeze and the economic gurus do without tons of room for loopholes and horribly complicated formulations to adhere to. lastly people like me would have to give up thier sarcasm.

By Dave @ 10/16/08 11:06:47 PMreport abuse

look in the mirror

More cops? We need more individual responsibilty. True, congress and the presidents helped create this mess, and then greed set in in the finance sector; but who was applying for credit they couldn't afford? And, who still lives beyond their means on the credit card. People need to start looking at what they absolutely need first, and then if they have a good emergency stash built up they should start looking at what they desire!

By me @ 10/16/08 09:27:00 PMreport abuse

Dear Frank

Interesting, I don't see how anything I proposed could be construed as expanding the powers of Federal government anymore than they are already being flexed. Of course your little diatribe seemed so full of anger and bitterness I don’t think you are prepared to consider anything with any degree of calm rationality.
To bad you didn't have a chance to deliver your views on government to Abraham Lincoln before he passed along that whole "by the people, for the people" concept.
Your concern for my financial issues is also much appreciated but I believe I'll be able to manage without such extreme measures. I posted the comment to search for solutions, not to just give up. In general, I don't think a mass run to declare bankruptcy is going to do our present economic situation any good.
Anyway thanks for the feedback, if anyone else has some input on my proposal (preferably constructive in nature, pro or con). I’m ready to listen.

By T. Crow @ 10/16/08 05:12:27 PMreport abuse

Economy Stuff

For those who would just let the banks fail and everything go to zero....are you ready for anarchy. Right now there are Chinese workers holding the Israeli managers hostage over a failed Lehman resort. This mess has just started and it is a WORLD CLASS MESS! I see the beginning as the Day Trader Greed mess, then the mortgage business mess. Wall Street is billowing because the greed never ends. Clark is right, we had to pump up the greedy banks or suffer a world collapse. It is not a case of socialism, it is a necessary action supported by the best financial minds in the world.

By Lindy @ 10/16/08 04:07:17 PMreport abuse

Un-frikken-believable!

T Crow said: "this plan provides a solution by allowing the government to assist the taxpayers (the very people our government is suppose to look out for)"

No T Crow, our government is not supposed to "look out for" us, if anything we should be looking out for the #@!% government. The U.S. Constitution was written to limit the powers of the federal government. Maybe you should read it some time.

As for your $70K predicament, that's really too bad. Instead of looking for someone else to feel sorry for you and for Uncle Sam to write a law that will "help" you, why don't you march your butt down to a bankruptcy attorney and get it over with right now?

By Frank @ 10/16/08 03:29:06 PMreport abuse

Here's a solution, I say "Let's do it"

Everybody would like solution for our economic troubles, here’s one and I’m pretty sure it will work. It involves:
(1) Creating a solution at the foundation of our economy,
(2) Restricting the ability of future poor financial judgment to undermine the solution
(3) Clearly defining the responsibilities and timeline for reimbursement of initial cost plus interest.

We implement a federal debt consolidation program at about 7% over an 8-10 year term. This pulls households out from under excessive credit/unsecured debt payments while still holding them accountable. (This is similar to the existing Student Loan program except the money would be paid directly to the lender and the credit account closed, the money would NOT be handed over to the individual)

Stipulation: Along with the consolidation of debt, the households would be legally held to strict credit/debt limits during the term of the loan. For example, each household could be allowed:
1 mortgage loan (no more than 6x Annual income)
1 autos loan (2 for joint filing households)
And a maximum credit limit of no more than 10% annual income

Those fine Americans who have been good custodians of their finances will not be held liable for mistakes of others, nor restricted in their financial capability. Meanwhile, the folks who have not been so responsible will have a chance to set their finances in order.

For example:
Consolidating my own credit/ loans equals 70K. Financed over 10 years at 7% equals $800/month as opposed to the $2,600/month I currently pay.

Advantages:
1. Immediate extra money available to be pushed into circulation at the consumer level for economic stimulus without resorting to a meager handout that most households would only use to pay a fraction of their credit payments.

2. The influx of funds from the payoffs, coupled with the loss of continual interest-fattened payments is likely to send banks into a lending frenzy, eliminating the credit and commercial paper freeze.

3. Instead of the socialist inclination from federal intervention in financial institutions, this plan provides a solution by allowing the government to assist the taxpayers (the very people our government is suppose to look out for)

4. While not directly affecting the overshadowing mortgage crisis, collateral relief would be found in households with the renewed capacity to afford mortgage payments.

Disadvantages:
1. People will almost assuredly begin looking for loopholes.
2. Developing enforcement of credit limits may prove complex but by no means impossible.

Probable initial cost: $1-1.2 Trillion, but it is not being leveled as a tax burden back onto the general populace and the plan for reimbursement is established with about $400 Billion of interest.

I’d like someone to show me a flaw in the logic or practical reason that makes this idea unfeasible. If you agree, I recommend we do something to make it happen. It would be a godsend to about 50% of the consumers in this country.

By T. Crow @ 10/16/08 12:22:03 PMreport abuse

Loony leftist prescriptions

Aristoggle said: "Perhaps it's time to get back to Keynesian economics. Let's spend some money on infrastructure, getting bridges and other stuff rebuilt"

That sounds all well and good, but what EXACTLY does the phrase "spend some money" mean? It means to allocate wealth as in human labor and materials we own outright. If we aren't allowed to borrow "money" for these grand schemes then we have to work with only what's available, or print some bogus paper "wealth", and that is the choice we face right now.

Printing (electronically these days) money does not increase wealth, it just makes the stuff we have available more expensive to buy. Germany in the '20s, Brazil in the '70s, Russia in the '90s, and recently Argentina all tried to print their way to a better economy. It did not work for them so why on Earth do people think it will somehow work for us?

Here is a tidbit that should sober some people's planning. The bank crisis in Iceland ended up costing about $500K per citizen when all of the bailouts needed to fix the system were added up. If it only costs half as much to fix the bank problems here in the U.S.A., 250K per citizen, we will need to set aside $75 TRILLION or about six years of GDP.

In other words we would have to all work and devote a huge portion of our labor and wealth for many, many years to solve the problems in the banking sector alone. Does anyone think this can actually happen?

Empires come and go, revolutions spring up, governments fall. We are not immune to history.

God help us in the coming years...

By Frank @ 10/16/08 12:19:43 PMreport abuse

Time to get back to Keynes?

Well, the trickle-down now seems to be working. All the pain is trickling down to us while the banks get bailed out. So much for voodoo economics.

Perhaps it's time to get back to Keynesian economics. Let's spend some money on infrastructure, getting bridges and other stuff rebuilt, and maybe build some infrastructure to start weaning us away from oil.

Get the money flowing for now ... and then stop when things turn around! Where have all the fiscal conservatives gone?

By aristoggle @ 10/16/08 09:52:16 AMreport abuse

Capitalism

QUOTE from a popular maganize published in 1980...

“In order to clear up the present economic problems everything must be set back to zero”

What will soon happen, then, is similar to what a Japanese businessman answered when asked about a solution to today’s economic turmoil. He remarked: “In order to clear up the present economic problems everything must be set back to zero.”

The possibility of today’s economic systems crashing has been a more frequent topic of discussion among economists lately. For instance, American financial commentator Sylvia Porter spoke of the real possibility of an “inflationary blowoff in this nation and the world, destroying the confidence in any investment in ‘paper’ [money], and so undermining the functioning of our international monetary system that trade among nations would grind to a near standstill.” The columnist added:

“The blowout would then ripple out to cause a rash of bankruptcies among businesses, a collapse of the dangerously swollen credit bubble, an upsurge in unemployment, foreclosures of vastly overextended mortgage credit, and repossessions of goods bought on installment loans the debtors could not repay.

“The scenario becomes more scary even as I write it.”

“Nations cannot go on borrowing to improve living standards”

Political commentator Jack Anderson similarly commented on the shaky money situation, stating:

“Nations cannot go on borrowing to improve living standards. The money can never be paid back unless it is invested in production instead of consumption. For many countries, the debt is already greater than they can absorb without a financial breakdown. . . .

“Skyrocketing prices keep adding to the bad debts until the whole banking system is threatened with collapse.”

The American Institute for Economic Research makes the following observations:

“During the next several years, the following economic developments seem highly probable:

“A severe and prolonged worldwide depression. . . .

By Mark P @ 10/16/08 09:12:07 AMreport abuse

dangerous error

There is one simple but extremely dangerous error being made by the man who is the world's greatest expert on the time period and economics of the Great Depression, Dr. Bernanke, Chairman of the Federal Reserve.

The Chairman is an expert on the history and consequences of that period. He is being guided by this deep knowledge, yet is totally oblivious to the consequences of the alternative actions he is taking to not make the same errors as the 30s. This is all in his attempt to prevent his president from going down in history along with other failed economic leaders.

The unprecedented creation of infinite dollars for the purpose of flooding the world's entire financial system is causing the birth an inflation of types unknown in a modern economy.

The test case for the CONSEQUENCES of present united central bank actions is the history of the Weimar Republic, but this time it is on a planetary basis.

CONSEQUENCES cannot be avoided by any means. They are economic equal and opposing forces. That is simple fact.

In an attempt to avoid what the Chairman see as consequences of incorrect central bank action in the 1929 - 1933 period, he is creating new and infinitely more dangerous, longer lasting, society changing, politically provocative new sets of unexpected economic CONSEQUENCES.

The only number that might compare to the nominal value of all OTC derivatives is a count of all the individual plankton in all the oceans of the world and then only maybe.

The world will never be the same because of the greed of these 29 year olds and the old goat bosses who sat at the long desk of the board of

By mark @ 10/15/08 09:57:04 PMreport abuse

It's been tried before

A couple of generations ago we had "strongman" leaders in Europe and Japan who nationalized industries and asked voters to give them unprecedented powers over the media, military, police, and civil liberties. It ended with tens of millions dead and entire continents in ruins.

Are we really stupid enough to fall for their sales pitch again?

By Terry @ 10/15/08 08:05:04 PMreport abuse

What Capitalism

"If we learn anything from all of this, it should be that we need more cops on the beat to protect us from the excesses of capitalism."

What "capitalism"?? We don't have real capitalism in America, and we haven't for a long time!! We have socialism and redistribution of wealth. With true capitalism without excessive government intervention, you have a motivator called FEAR! If you act unwisely, you lose and go out of business. But in our socialist society, if you are rich and act unwisely, you get bailed out by the government for the "good of the people/society." The government doesn't EARN anything, it only takes from some and gives to the preferred. The "cops" in capitalism should NOT be in Congress appropriating spending and collecting taxes, but in the Judicial branch prosecuting people who break laws and act unethically. The government can take what is not theirs and give it to someone else, but if an individual does that it is stealing! Hence, the government is the criminal here in our current "capitalist" country. So how can they be the "cops"?? What they are doing in nationializing these banks is unconstitutional, and I hope the executives of these banks take them to court on this rather than give in to their criminal behavior.

I am very disappointed in you Clark. I have listened to your show for quite a while, and you are great at consumer protection, but you lost me as a listener now that you promote socialism.

By Brian @ 10/15/08 05:50:46 PMreport abuse

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Oct 15, 2008 -- Clark's take on the partial nationalization of banks

What others are saying