"government takeovers may be the only way to get the financial system working again"

With regard to Mark Thoma's September 23rd post, "Hold to Maturity versus Fire Sale Prices":

Mark writes, "If we reduce the future profitability of these firms at all (by that I mean the amount available to private investors), say by demanding a share of future profits for the government, that will make it harder for the firms to raise private capital since expected future profits will be lower. So, by having the government take a share of any upside, the result may be less willingness of the private sector to participate in recapitalization."

There's a relatively easy solution to this. The government just buys (takes over) the firms (Princeton economist Paul Krugman writes, "government takeovers may be the only way to get the financial system working again"). Then credit will flow because the government does not have a problem comming up with money to loan out. When the bad assets are removed from the books and the firms are in order, then the government sells them back to the private market. This has been done successfully many times, and it allows the taxpayers to reap the benefits of the massive government cash infusion, rather than the firms existing shareholders and managers.

Why not just do this appearantly better and more efficient solution? The same reason we don't do so many clearly better and more efficient solutions, simple-minded Republican ideology that's highly resistant and often downright hostile to logic and evidence (see Columbia Economist Jeffery Sach's recent article, "Anti-Intellectualism", Princeton Economist Paul Krugman's, "Know Nothing Politics" -- "Republicans, once hailed as the “party of ideas,” have become the party of stupid." -- and New York Times Columnist Thomas Friedman's, "Making America Stupid"). Republican ideology says government ownership of almost anything is bad. This has lead to massive inefficiency and complication in things from health care to student loans to the spiders web of extremely hard to monitor and control contractors and mercenaries in the military.

It takes a great deal of political pressure/danger to get the Republicans to deviate from their ideology. We'll soon see if there's enough here to get a good plan.