Many banking experts say nationalization of the big banks won’t happen.
Felix Rohatyn, the man credited for saving New York City from bankruptcy in the 1970s, isn’t one of them.
“Nationalization of big banks is a notion I wouldn’t rule out,” Rohatyn tells the Financial Times.
“I know that in our terms it’s such an explosive notion that everyone will do whatever they can to avoid it.”
“But,” he says, “I wouldn’t rule it out because at some point you may find that you don’t have that many options.”
“I don’t think we’ve reached that point yet, but I wouldn’t rule it out because it’s a lot simpler in some ways.”
The Obama administration’s plan for a public-private partnership to buy banks’ toxic assets makes sense, Rohatyn says.
“I think that no matter what happens people will say that rich people made money again, that this is very unfair.
However, he says, “They [the Obama administration] have to do what they have to do to save the situation. If one of the collateral effects is that some wealthy people get a little wealthier, so what?”
As for Obama’s fiscal stimulus, “it probably won’t be enough, but I think it’s a very good first step,” Rohatyn says.
Nobel laureate Paul Krugman agrees with Rohatyn that more stimulus is necessary — to the tune of 4 percent of GDP for both the U.S. and Europe.
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