Legal Commentary

Anger At Financial Institutions Make Temporary Takeovers The Only Politically Palatable Bailout

By Big Tent Democrat

I wrote about this yesterday, but it is now becoming conventional wisdom. The upside to the AIG furor is that the Obama Administration, should it wish to do so, will now have a much freer hand for adopting temporary takeovers as the the first bailout option. Indeed, it seems to be fast becoming the only politically possible option. Just this morning even Joe Scarborough was advocating for temporary takeovers and "preprivatizations." The Adam Nagourney writes:

The Obama administration is increasingly concerned about a populist backlash against banks and Wall Street, worried that anger at financial institutions could also end up being directed at Congress and the White House and could complicate President Obama’s agenda. . . . Mr. Obama’s aides said any surge of such a sentiment could complicate efforts to win Congressional approval for the additional bailout packages that Mr. Obama has signaled will be necessary to stabilize the banking system.

. . . [T]he financial crisis is the most acute problem facing the administration, one it will not be able to play down. Christina D. Romer, the White House’s chief economist, said Sunday on “Meet the Press” on NBC that the administration was close to unveiling details of its plan to remove the worst of the bad assets from the books of banks, a move sure to refocus attention on winners and losers from bailouts.

(Emphasis supplied.) In my opinion, this is a good thing. The Obama Administration has been entirely too timid in its approach to the financial crisis. Here is a case where angry populism could force the Obama Administration to do the right thing, something it has been reluctant to do - temporary takeovers of insolvent financial institutions.

Speaking for me only

Full post as published by TalkLeft on March 16, 2009 (boomark / email).