Bloomberg News has a report on a Nobel-prize-winning economist at Columbia University, Joseph Stiglitz, having said, as the wire puts it, "the world's biggest economy is suffering because of the U.S. government's failure to nationalize banks during the financial crisis.":
"If we had done the right thing, we would be able to have more influence over the banks," Stiglitz told reporters at an economic conference in Shanghai Oct 31. "They would be lending and the economy would be stronger."
We're not quite sure we follow Mr. Stiglitz's logic. If the right move in any conflict between government and a recalcitrant private institution is for government to nationalize the private institution, property rights notwithstanding, why stop with the banks? Mr. Stiglitz's own university is refusing to do what the government wants as far as allowing military training on campus. As an illuminating dispatch in the New York Times over the weekend pointed out, even Columbia's most prominent graduate, President Obama, spoke out about the Columbia ROTC ban, saying, "The notion that young people here at Columbia, or anywhere, in any university, aren't offered the choice, the option of participating in military service, I think is a mistake." If the government nationalized Columbia, its influence there would be stronger, too. But that doesn't make it a good idea. Maybe the Bloomberg account doesn't fully convey the nuances and reasoning of Professor Stiglitz's remarks, but, on the face of it, we're not convinced by his argument for bank nationalization. The article doesn't reflect any ideas about how the banks private shareholders and debt-holders would be compensated in that scenario, or how the threat of such a seizure would affect transactions and investment in the rest of the economy. If Columbia were seized by the government, wouldn't a private donor considering a gift to another university reconsider, knowing that the gift could then be subject to confiscation along with the rest of the university? The bank-university parallel is imperfect, because one is a regulated business and one is a not-for-profit organization that receives some government funding. But it's a comparison that might nonetheless be somewhat instructive to academics who are quick to argue for the seizure of someone else's organization but might be less pleased if it were their own organization that were being seized.