The Activist

A blog post from an economic ignoramus:

The shit* has hit the fan** and the economy is in trouble. Any progressive solution to the crisis ought to focus on helping people renegotiate the terms of their mortgages. Not only will this help struggling homeowners facing foreclosure, it will probably be better for credit markets if regular folks keep making their payments.

But the subprime mortgage meltdown and the recent failures of financial firms present the left with a special teaching moment. In this crappy situation there is a crapportunity  for socialism.

At this late stage, the government has only two options: 1) spend billions buying up mortgage-backed securities for more than what they’re worth, saving financial firms but shafting the taxpayers; 2) spend billions taking over Wall Street’s troubled (but still potentially profitable) firms, eating the shit sandwich today, but reaping the rewards if and when there is a turn-around. Unless it does one or the other,  the credit markets will freeze up and the economy will grind to a halt.

The best option is definitely option #2, i.e. nationalization.

This isn’t some far-fetched socialist fantasy.  As of its recent rescue, the insurance giant AIG is basically owned and controlled by the U.S. government. Fannie and Freddie have also been nationalized.

Uncle Sam isn’t interested in keeping AIG as a state-run enterprise for the long-term, but at least he has the chance to turn a socialized profit once AIG’s various bits and pieces get sold off.

So let’s raise the scarlet standard high and nationalize the commanding heights of the financial sector. Aux Barricades!

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*Usurious and dishonest lending
** The bursting of the housing bubble.