This comes lock, stock and barrel from one of the biggest financial blogs, Calculated Risk.
President Obama gave an interview to ABC which will be aired tonight. In it, he admits that he is afraid to propose the financial rescue plan that works, so he is going with the financial plan with a proven history of failure -- because ideologically he does not believe Americans can support the successful plan.
Flame me if you want, but read the quote first and tell me I'm not right about Obama's colossal admission, below the fold.
This is an excerpt from the ABC interview of President Obama:
ERRY MORAN: There are a lot of economists who look at these banks and they say all that garbage that's in them renders them essentially insolvent. Why not just nationalize the banks?
PRESIDENT OBAMA: Well, you know, it's interesting. There are two countries who have gone through some big financial crises over the last decade or two. One was Japan, which never really acknowledged the scale and magnitude of the problems in their banking system and that resulted in what's called "The Lost Decade." They kept on trying to paper over the problems. The markets sort of stayed up because the Japanese government kept on pumping money in. But, eventually, nothing happened and they didn't see any growth whatsoever.
Sweden, on the other hand, had a problem like this. They took over the banks, nationalized them, got rid of the bad assets, resold the banks and, a couple years later, they were going again. So you'd think looking at it, Sweden looks like a good model. Here's the problem; Sweden had like five banks. [LAUGHS] We've got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the problems in terms of managing and overseeing anything of that scale, I think, would -- our assessment was that it wouldn't make sense. And we also have different traditions in this country.
Obviously, Sweden has a different set of cultures in terms of how the government relates to markets and America's different. And we want to retain a strong sense of that private capital fulfilling the core -- core investment needs of this country.
And so, what we've tried to do is to apply some of the tough love that's going to be necessary, but do it in a way that's also recognizing we've got big private capital markets and ultimately that's going to be the key to getting credit flowing again.
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Here is the observation from Calculated Risk:
S]aying that Sweden had five banks and the U.S. has thousands, so nationalization can’t happen here, is misleading. It ignores the relative GDPs of the two countries. ...[and] the problem is chiefly in the six largest U.S. banks ...
But stop and think about what Obama is saying. We know the correct answer, but we are afraid to do it - because of our "culture" - so we are going to follow the Japanese plan.
We should definitely stress test the banks. My suggestion: announce when this will be complete (within 30 days), make the results public, and [temporarily nationalize] the insolvent ones.
Wow. That is an absolutely colossal, devastating admission -- one thaat Geithner announced today will cost the taxpayers $1 TRILLION! --from Obama.