What If?

I realize this squares 180 degrees from what I posted a few days back - But hey, this is just my stream of consciousness - If I didn't wrestle with these broad macro concepts, where would that leave me?...Probably significantly richer and much better rested! I really am a behavioral economists trapped inside a trader. The jury is still out if they are on the same page...

Getting back to things - When would a broad based and bold bank nationalization plan be politically capable? When would it not be political suicide? Perhaps tomorrow?

In the last few days the Republicans in both the Senate and the House have been building and setting the traps for their next elections. Speeches and press conferences with allegations that the "Obama" stimulus plan will be the death blow to the economy are being made with great fervor and repetition. Let's face it, the Republicans hold really shitty cards. Cards so hollow they could easily cause the party to go bust in the next House elections. In the mean time their best alternative is card trickery and illusion. Their hope is that the economy in four years will still be as stagnant and perilous as it is today and they can point their finger all the way back to Obama's first days and say, "Ah ha! There's where it came off the rails - it was his liberal stimulus plan!" You can already hear it all over the conservative radio dial.

The reality is a broad and powerful bank nationalization plan would have the greatest chance at delivering another term for the president in four years. Although it would be INCREDIBLY contentious in the near term with VERY powerful people left out in the cold and stripped of their investments - the banks would be restored to solvency much quicker than the slow bleed we have been experiencing. And although Obama and much of the Democrats had very little to do with this financial tsunami - in two and four years the economy will most likely still be in dire straits if a piecemeal solution is delivered as the antidote. All the Republicans would need to do is cash in their phony chips for redemption. 

I have been shocked in the past month as to how far the BKX has fallen even with all of the Fed and Treasury interventions. Perhaps the charts were expressing that in January when the BKX fell completely out of bed - yet the overall market held its resolve. We shall see in the coming days. 

I'll leave you with this clip from Martin Wolf, chief economics commentator for The Financial Times. He thinks the administration would be too scarred to take the right medicine. I think he makes a descent case as to why they could choose it. It's radical - but in the long run the broad populist would have the greatest immediate benefit. The people who brought Obama to the White House would have their cure and many of the financial elite would be castrated and humbled. http://finance.yahoo.com/tech-ticker/article/172116/Part-II%3A-U.S.-Too-%22Politically-Frightened%22-to-Admit-Truth-About-Banks%2C-FTs-Wolf-Says