I defer to Noam’s expertise on banks, but this column by former Secretary of the Treasury James Baker in the Financial Times sure sounds to me like an argument for nationalization. Baker says he is not issuing a “a call for nationalisation but rather for a temporary injection of public funds to clean up problem banks and return them to private ownership as soon as possible.”  Here is what would happen under Baker’s scenario for non-nationalization:

To prevent a bank run, all depositors of recapitalised banks should be fully guaranteed, even if their deposit exceeds the Federal Deposit Insurance Corporation maximum of $250,000 (197,000, 175,000). But bank boards of directors and senior management should be replaced and, unfortunately, shareholders will lose their investment. Optimally, bondholders would be wiped out, too. But the risk of a crash in the bond market means that bondholders may receive only a haircut. All of this is harsh, but required if we are ultimately to return market discipline to our financial sector.

That’s another Republican (albeit moderate) vote for the alternative that the Obama Treasury Department is still unwilling to embrace.

--John B. Judis