I refer to The Bonfire of The Vanities by Tom Wolfe as the defining literature that captures the current economic collapse. Joseph Heller's brilliant satire Catch-22 serves the purpose equally well. And yes - there are others.
Here's a section from Billmon's post. Maybe our first step before nationalizing the banking system is, as an entire nation, entering a 12-Step Program designed to get us all to stop lying - to ourselves, to one another and to the world:
"It’s not that nationalization (or "pre-privatization", as marketing savvy supporters are already calling it) would be a day at the beach. Once the feds starts seizing some banks, even insolvent ones, it’s quite possible private capital will start to flee from all of them, ultimately forcing the Obama Administration to socialize the "commanding heights" of the entire US – and thus the global – financial system. While that thought certainly gives a tingle to my inner communist revolutionary, the running dog lackey part of me wonders whether completely freaking out the global bourgeoisie is such a good idea – at a time when global capitalism already seems to be teetering on the edge of a nervous breakdown.
But it’s also entirely possible that an expectations trap will drive the Obama boys there whether they want to go or not. The more the markets discount the risk of nationalization, the weaker the banks get, and the weaker the banks get, the more likely nationalization becomes. We may be more than halfway there already.
Maybe that would be for the best: My inexpert guess is that full nationalization still would be less expensive and messy than creating the kind of Potemkin markets the Geither plan seems to envision – even if the unintended consequences may be more difficult to control.
At the very least, it would be a more honest solution. One of the things that creeps me out about the political system’s response to the crisis so far – the insolvency of the banking system in particular – are the increasingly desperate attempts to maintain a phony façade of free markets and private enterprise, in an economy now utterly dependent on the federal safety net. I totally expected that from Hank Paulson and the Cheney Administration, but is Obama’s financial team really pressed from exactly the same Wall Street mold?
It may be best not to think too much about that question. It reminds me too much of the USSR’s fetish for preserving the trappings of socialist "democracy" – a Supreme Soviet, a ministerial government, courts, etc. – even though the actual decisions were all made, behind the scenes, by the party and the Politburo. It’s not a good sign when societies routinely lie to themselves about such big, fundamental truths, which in turn suggests that toxic assets may not be the poison we most need to worry about: The rottenness and decadence of the entire system may do us in first (not exactly a new theme for me.)"
Another hat tip to Yves Smith. Thank you for mentioning the Billmon post on Naked Capitalism.
And, finally, in case you had any doubts, a comment from KStreetProjector on Billmon's post:
"I build IT Systems. About half my work over the years has been for banking operations. Over a decade ago, a substantial number of people working in the banking sector understood we were building systems to sell...smoke.
And some of the better bankers knew it too. Bankers will sell any products people are willing to buy. Money itself is conceptual value. Making variations on conceptual value is their job.
Regulation is the only thing that keeps them (sometimes) in the realm of plausible. The Bush administration gutted the best oversite people in the SEC, FDIC and many other agencies. The agencies were viewed the banks, who fund the election processes as "customers". This version of regulator as facilitator allowed the most unhinged of speculative visions of value to float free.
All of my major banking clients, with one possible exception, are functionally bankrupt. They know it. I know it. All the vendors know it. The two remaining regulators who hid from the Bushies for the last 9 years know it.
The question is not when, but how, and how costly the destruction of most of the US Financial institution will be.
And with any wounded, floundering and bleeding animal...I would prefer to see it sooner rather than later."
Read Billmon's entire post here.