By the way the mad Green Left have launched their own campaign to nationalise the Australian banks. It is a confused proposal that fails to see the lack of competition between the Australian banks as the reason for their high profits and poor performance. While I agree with some of these criticisms it must be acknowledged that they are at present solvent! No small issue in current dangerous times.
Gary Becker has useful things to say on the public ownership issue. The issue is to provide liquidity and to bolster trust. The idea of pollies - of the Kevin Rudd type - having a management say on which major private sector projects get funded in our type of society (green cars, water efficiency schemes) is not something we should think about for a minute.
By the way, Willem Buiter is scathing on the verbiage coming out of the IMF. He has to my mind a more down-to-earth and sensible approach to resolving the crisis of confidence that is currently threatened to bring the world financial system completely to its knees :
(1) Public guarantees of interbank lending between banks in different national jurisdictions. This could be implemented by national central banks acting as counterparty of last resort in the (unsecured) interbank markets.John Quiggin is also keen on 100% deposit insurance schemes of the type just announced by Kevin Rudd. My presumption is that this is primarily directed at stopping runs on small non-bank lenders in Australia should there be a 'rush to quality'. Of course for the moral hazard reasons mentioned by Buiter this should - at best - be a short-term measure. It has the negative feature of drawing attention to the fact that deposits are not in fact guaranteed - many Australians do not know this - and raises explicitly the prospect that perhaps these institutions are threatened. Note that, significantly the Rudd scheme also apparently includes a guarantee on interbank lending which is one of the sensible points on Buiter's list. This will restore trust and encourage lending that will free up paralysed capital markets.
(2) International agreement on limits on public guarantees for other bank liabilies and for liabilities of other highly leveraged institutions. This includes agreements on terms and conditions attached to such guarantees.
(3) International agreement on recapitalisation of banks with significant cross-border activities.
(4) Fiscal bail-outs of countries whose systemically important banks have a solvency gap that exceed the government’s fiscal capacity.
(5) International agreement on mandatory debt-to-equity conversions for banks and other highly leveraged institutions.
(6) International agreement on avoiding a moral hazard race to the bottom for deposit insurance through limits on deposit insurance (this is really as special case of (2)).
(7) International agreement on common access rules and common methods for valuing illiquid assets in different national TARP-like structures.
(8) International agreement to adhere rigorously to mark-to-market accounting and reporting principles and on common rules for relaxing regulatory requirements attached to marked-to-market valuations.