Paulson Reverses Course

Stormy at Angry Bear asks as Paulson Reverses Course :

Whom are we bailing out? Who is getting the cash? Are they going to play the old "me first" games?

Not that I want to, but I am going to suggest a radical alternative. This ship is going down, fast. Financial capitalism is broken. (Note the adjective, please.) Nationalize the banks and all lending facilities. Just do it. Set a reasonable rate for credit cards and other types of loans--and mortgages. Set up real lending standards. No one gets ten credit cards; they get one, if that. No more multi-billion dollar CEOs and their cadres of wolves. No more figuring out ways to game the credit system.

For those of you who still believe in free market banking and lending, here is the bottom line: If you thought Ben Laden was a threat--or that Saddam Hussein, a third world dictator was a threat--, well, I have news for you. We are looking down the barrel of a real threat.

If this system really crashes, you will know what a security threat really is.

How about your homes, your jobs, your retirement?

We have met the real enemy. It is time we faced facts, hard facts. The guys in charge still want the old system to work, still want the lending boys to make a bundle.

Even if we nationalize the entire lending system, we will be a long time in recovering from this mess. But at least we will have understood our problem and took steps to rectify it.

The consequences of not facing it are too dire to contemplated.

Emphasis Mine. Italics in original

Stormy assumes that you can nationalise the financial system and keep Capitalism. Good try. Unfortunately, the investment decisions would no longer be done by the Capitalists but by bureauscrats: a form of Socialism.

As we are finding out, the amount of private capital pales against the amount of capital available through the financial system. This is why the current system is called financial Capitalism.