Bailout Incrementalism Continues

According to the WSJ, Treasury and the Fed are considering two big ideas. The first is to create a new state-owned "bad bank" to buy up toxic assets — TARP I, essentially, rebranded. The second is to institutionalize the deals given Citi and BofA, so that anybody can get them.

But where is nationalization? It’s a better idea than either of these, because it gives the government more upside and also more control — both over management decisions and over the degree to which the banks are actually lending.

Anecdotally, even anti-big-government Republicans are coming around to this way of thinking: more half-measures simply aren’t going to work, and if we are going to end up nationalizing, better we do it sooner than later. So I wonder do why the nationalization option never made it into the WSJ story. If it’s been rejected as an option, I’d love to know why.

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