It’s a Sad Day when Nationalization is the Silver Lining

socialistrealism.gifDave asks “What do you think, Nate should “Berneke and Paulson [have] looked on in stony indifference” here too?” To be entirely honest, the answer is I don’t know. Frankly, I am not sure that anyone else really knows either. My instincts are for letting it fail. I have no idea how I am supposed to evaluate the too-networked-to-fail argument.

Although it is hard to tell from the details that we have now, I am encouraged by the fact that the government didn’t simply shell out cash to save the company. I think that it is better if feds end up owning AIG, or at least holding the threat of ownership. This at least diminishes some of the moral hazard effect, and I think that if the tax-payers are going to foot the bill for a company’s debt, then going forward the company ought to be managed in the interests of the tax payers. Better nationalization than a world of promiscuous government guarantees of private actors.

On the other hand, I have a hard time thinking that nationalizing the home-mortgage and insurance industries is a path to prosperity. Particularly, when the tax payers are left owning the bits of the industry that no one else wanted. In favor of a bit of creative destruction, I would point out that it is worth remembering that even when we are talking about sub-prime mortgages, most of them ARE NOT in default. At the margins they are in default, and the margin is a lot bigger than everyone expected. On the other hand, there are still — even in the troubled bottom end of the home lending market — a lot of valuable assets out there, and I am not convinced that letting the losses lie where the contracts put them will bring the entire system to its knees. On the other hand, I am a lawyer, which means that almost by definition I don’t know what I am talking about when it comes to finance.

Still, its a sad day when the silver lining for me is nationalization.

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3 Responses

  1. Patrick S. O'Donnell says:


    Where did you find the picture and do you know who made it? It reminds me a bit of Adélaide (Ade) Bethune’s work for the Catholic Worker but I don’t think it was by her and I can’t make out the name.

  2. Nate Oman says:

    I believe that it is an old soviet postage stamp from the socialist realism movement.

  3. Patrick S. O'Donnell says:

    Thanks Nate, I found it: It is by Helios Gómez (1905-1956), an artist of the Left (anarchist, communist, etc.). He lived quite an interesting life and was actually critical of (although clearly influenced by) socialist realism. A taste of that life:

    “In 1950, in the course of one of his long periods of imprisonment-between 1948 and 1954-at the pressing request of the chaplain of the Modelo prison in Barcelona, Bienvenido Lahoz, a priest of the Order of Mercy, Helios Gómez agreed to paint frescos consecrated to the Virgen de la Merced, the Virgin of Mercy, patron saint of Barcelona and of prisoners.”

    See: (There is an organization dedicated to his life and work: The Helios Gómez Cultural Association was legally set up on 20 July 1998 in Barcelona, Catalonia (Spain)).