The case for public ownership of the financial system

UK-based economist Willem Buiter, who earlier in the year was fiercely critical of the U.S. approach to managing the financial crisis, is okay with the AIG deal. But he wonders if it should be the beginning of something bigger:

If financial behemoths like AIG are too large and/or too interconnected to fail but not too smart to get themselves into situations where they need to be bailed out, then what is the case for letting private firms engage in such kinds of activities in the first place?

Is the reality of the modern, transactions-oriented model of financial capitalism indeed that large private firms make enormous private profits when the going is good and get bailed out and taken into temporary public ownership when the going gets bad, with the tax payer taking the risk and the losses?

If so, then why not keep these activities in permanent public ownership? There is a long-standing argument that there is no real case for private ownership of deposit-taking banking institutions, because these cannot exist safely without a deposit guarantee and/or lender of last resort facilities, that are ultimately underwritten by the taxpayer.

Apple CEO Cook Gives Up $75M in Stock Dividends

NEW YORK — Apple CEO Tim Cook is giving up $75 million in dividends on restricted stock that the company is awarding to all of its employees.

In a filing with the Securities and Exchange Commission on Thursday, Apple Inc. said that Cook requested that his restricted stock units not receive dividends. The dividends that Apple workers are getting amount to $2.65 per quarter for each restricted stock unit held. The shares are not normally eligible to receive dividends, so Apple’s decision is a perk for its employees.

Curmudgeon

Hmmm. Does public ownership guarantee fiscal prudence and responsibility? Given the track record with Congress and various government and quasi-government organizations, I think not. And some portion of wealth is in fact created through financial innovation, although the herd mentality seems assured to end such innovation in disaster.

In any case, the problem doesn’t appear to be with deposit-taking institutions right now, does it?
Justin Fox

You’re doin’ a heck of a job, Willumstaddie!

I don’t think the problem started with deposit-taking institutions, no. And they’re generally not the ones getting hit by runs right now. But they’re all vulnerable if asset values keep dropping.
curious steve

wall street is on a borrowed time, as well as on a borrowed money. it won’t last long. all the mccain friends will be bailed out one way or another, with the public money, before the election, and obama and the people will be stuck with unknown amount of bills, which our children and grandchildren will be paying off. they will be slaves to the thieves, who will be long gone beyond the legal reach, with their ill-gotten by then.
Independent

Public ownership of the financial system? I will settle for more public oversight of the financial system ….. and greater public ownership of the health care and educational systems.
Recon73

More oversight by the Feds is needed. Its clear these unrestrained financial wizards are good at only paving their own pockets and could care less about whoever or whatever else gets in the way.