Justin Fox offers an elegant plea for the various participants in the nationalization debate to start making a bit more sense:
Krugman, Simon Johnson and a lot of other people think the government should be moving a lot more quickly and decisively to take over the most troubled banks and clean up their balance sheets. The Treasury approach appears to be to do some work on the balance sheets—through efforts to modify mortgages and buy up toxic assets—and then figure out what to do with the most troubled banking companies. As I've written before, this is really a debate about tactics, not basic questions of finance and economics. The debate involving basic questions of finance and economics is the one that's just getting started about how we regulate the financial sector.They're not totally unconnected, of course: Johnson has an article in the May Atlantic arguing that a recalcitrant financial oligarchy is standing in the way of solutions on both fronts. But I don't get why we keep having this misleading back and forth on whether to nationalize the banks or not. I don't get why the Obamanites keep using that we're-not-Sweden line, and I don't get why the Krugmanites are so unwilling to see any of the administration's moves as laying the groundwork for possible future nationalizations.
I think you can actually sympathize with the Obama team's motivations. If you're willing to eventually nationalize, but you want to avoid that route if at all possible, you don't want to spend three months hinting at it and keeping the markets in a state of perpetual uncertainty. None of your other reforms can possibly work amidst such confusion. But among the universe of possible replies, the "we're not Sweden" thing seems particularly ill-chosen. We may well have to become Sweden, and if that happens, it would probably have been better to talk down the need for nationalization rather than the capability to successfully carry it out.
