Perhaps I missed the part where you actually explained why the 'toxic asset' strategy doesn't carry the same risk.

Right now, to most voters, Obama=Democrat, Democrat=liberal, and liberal=progressive. If Obama fails to turn the economy around, it won't matter which strategy he pursued. It will be seen as a failure of progressivism.

Yep, Ezra has fallen into the Washington world view. If Obama doesn't turn things around it won't matter that this was "Bush's" policy, it will be Obama's yoke.

Ezra, two different dynamics are at play on nationalization within the administration.

First, there's what you describe as "skittishness." I would say that's where Obama is right now based on his recent interviews. The administratino questioning how bold an intervention the administration should undertake and all the short-term versus long-term implications for his agenda.

Second, what only fuels the skittishness, is the Geithner-Summers anti-nationalization-unless-we-absolutely-positively-have-to philosophy. They want to preserve the private banking system as is, they don't want to sell out friends/former colleagues at Citigroup and Morgan Stanley. They have convinced themselves that so-called "toxic assets" are merely undervalued. And, I fear, they're (a) too entrenched in this position to admit they might be wrong and/or (b) even if they think they might be wrong, they won't want to admit any miscalculation because they'll lose (additional) credibility. So, they're scrambling to prove themselves right and still haven't quite figured out a concrete plan. The best they can do is come up with Obama's talking point that "well, Sweden only has five banks . . ."

Now, imagine if Obama were getting different advice on nationalization.

Yep, Ezra has fallen into the Washington world view. If Obama doesn't turn things around it won't matter that this was "Bush's" policy, it will be Obama's yoke.

Whazzis got to do with "nationalism"?

I think Ezra means that the public doesn't mostly consist of progressive blog-readers. If the administration lets the insolvent banks fail, well, Santelli & his ilk as well as a large many "Main Street" Americans will get their wish for the chips to fall where they may. Which is a fairly conservative policy choice, thereby keeping progressivism (government intervention) clean. This is the opposite of the (fantastical) Jindal argument that Katrina proves government action doesn't work...When conservatives did government intervention, it failed; if progressives choose non-intervention, justice is served and intervention can be saved for a less murky rainy day...and hopefully, Obama can still get reelected?

With a nod to Howard Fineman's article this morning, I think Obama needs to take a week to publicly focus on each piece of his agenda, with a prime time speech about 1. the problem (he inherited it), 2. the strengths and weaknesses of various policies, 3. his choice. Ironically, taking responsibility for policy choices will lessen the extent to which failure is owned by the administration. It also implicitly undercuts whatever opposition position the GOP would attempt.

Ezra: heads up on a bad headline for your post:

Nationalism and Nationalization are not the same thing, I'm sure you know.

This 'nationization' thing got out of control by poor communications management. FDIC takes over banks weekly and employs several different tactics to deal with the takeovers. None of them are called nationalization.

Now that the damage has been done on framing the choices, if I were Obama I would be rejecting nationalization too as a 'concept'.

Receivership or trusteeship is the actual terminology but we are now on a different semantic highway. The nationalization highway leads to political death even if successful.

Meanwhile, it appears that Federal laws on bank solvency don't really help for monsters like Citi and BOA. Less than 20% of Citi is an actual bank, and FDIC/Federal Reserve/Treasury has no authoritiy over the other 80% (except to force a bankruptcy or take over the bank portion).

When the Repubs (like Sen. Shelby R/AL) talk about letting the banks die but refuse to use legal terms, the implication is clear that they know not to get in bed with the term nationalization. They don't even want to use the word bankruptcy. Just let them die is the word.

I don't see a good way out of this nightmare that has turned into a fully awake horror story. There's not enough money for bailouts to continue. Obama has agreed that they won't let the 'too big to fail' banks fail because they are 'too big to fail'. This has turned into a version of the ancient maps that marked the unknown areas 'there be monsters there'.

Steve, it's not even remotely realistic. What he says is technically true, but it's going to be true of ANY strategy.

Come 2010 and 2012, Voters will holds Democrats accountable. They will do so if we nationalize and things don't turn out. They will do so even more massively if we give rich people ever increasing shitloads of money and it fails to turn things around.

They will do so because Obama is President, and 4 years should be plenty enough time to see if his policies are improving the situation.

Giving rich people money, a typically Republican thing to do, is going to obliterate all the difference between the parties that the Bush years have created. A failed bank nationalization would have a lot of effect on Washington. It will have no real emotional impact among voters beyond a small cadre of extremely right wing people. Continuing to give the wealthiest Americans more and more government money as your average voter sinks further under water? Washington won't give a damn, but it's going to utterly destroy your party when it comes to actual voters and real Americans.

Sorry steve, I somehow didn't notice the blockquote, which completely altered my perception of what you wrote. So much, that it's pretty much the opposite of what you really said.

sorry bout that.

First and as usual: What JimPortlandOR.

I don't see what the way out looks like either but there will be a way out. Again, I would trust the thinking of Simon Johnson on this. He has seen it before and can deal objectively with the wailing and the threats from the finance sector. There will be pain. Rip off the band aid and get over it - and cushion the blow for the bondholders that need it (pension funds, school districts etc).

It's hard to think of anything more politically risky, both for the Obama administration and for progressivism, than nationalization.

I think nationalization under a different name can be easily sold to the public but setting that aside, I can think of at least one thing that's worse for Obama and progressivism - passing an ineffective stimulus. That's why the budget fights (I'm including the omnibus spending here) are important. They have to do what they can to make up for the botched stim pack campaign - and then we need another stimulus. Throwing (well-targeted) money at the real economy is the answer for the demand side of the problem.

This explains so much of Obama's policy -- we can't change any Bush policies or our policies might fail and we might not get reelected. Well, a couple of changes in hugely unpopular areas are OK, but we still have to run against Bush's policies in the future