The Obama administration is mulling over the prospect of nationalizing the banks.

Long regarded in the US as a folly of Europeans, nationalisation is gaining rapid acceptance among Washington opinion-formers – and not just with Alan Greenspan, former Federal Reserve chairman. Perhaps stranger still, many of those talking about nationalising banks are Republicans.

Lindsey Graham, the Republican senator for South Carolina, says that many of his colleagues, including John McCain, the defeated presidential candidate, agree with his view that nationalisation of some banks should be “on the table”.

Mr Graham says that people across the US accept his argument that it is untenable to keep throwing good money after bad into institutions such as Citigroup and Bank of America, which now have a lower net value than the amount of public funds they have received.

“You should not get caught up on a word [nationalisation],” he told the Financial Times in an interview. “I would argue that we cannot be ideologically a little bit pregnant. It doesn’t matter what you call it, but we can’t keep on funding these zombie banks [without gaining public control]. That’s what the Japanese did.”

Barack Obama, the president, who has tried to avoid panicking lawmakers and markets by entertaining the idea, has moved more towards what he calls the “Swedish model” – an approach backed strongly by Mr Graham. In the early 1990s Sweden nationalised its banking sector then auctioned banks having cleaned up balance sheets. “In limited circumstances the Swedish model makes sense for the US,” says Mr Graham.

I am under no illusions that this is what Democrats have always intended. What better way of having political control of the economy than controlling the flow of capitol. Don't like coal plants? It becomes impossible to get loans to build coal plants. Need campaign donations? Hold up the possibility that a line of credit might be suspended. The possibilities for mischief are endless.

If this happens, the banks will never be independent entities every again. The Democrats could never let that much power slip through their fingers willingly. Friendly faces will populate the corporate boards as they did at Freddie Mac and Fannie Mae.

The Swedish model is fine in principle, but you'd have to be either a fool or an accomplice to trust the Democrats with this.

The fascist coup will be complete before the end of the year. The real question now is will we ever have another free election? I have serious doubts.

Michael Lewis (Liar's Poker) has written a long, entertaining, instructive piece on the Icelandic Saga, Boomandbust. This gives me several opportunities:

1. I'll try out Scribd - it seems to work ok below.

Iceland

2. It prompts me to publish "What I Learnt In Iceland", doggerel dashed off on my first visit to Iceland in 2007:

Rhubarb's a stem and not a fruit,
Prunes and muesli make you toot,
But snorchestras will drown out wind.
Allegedly (I'm not convinced)
Box jellyfish aren't jellyfish and
Greenland is further east than Iceland.
A Minister of Elvish Matters
Defines the routes of roads and detours.
Dottirs and ssons of Irish slaves
Kill foxes, whales, whatever moves,
And there's a certain charm in grimness,
Tax evasion, drunken primness,
Strapping horses, strapping women.
Real men who smell of fish and semen.
Volcanic science,
Car-mangling giants,
Fire and ice,
I think it's nice.

3. I can link my gallery from Iceland. These days my edits aim for a less sharpened, more 'liquid' image surface than here.

4. I can promote the gallery service called Phanfare. It's free, handles full-screen slideshows, accepts music uploads and is ergonomic. It's hard to find this combo.

5. I can promote the great value trek I took with Sherpa Expeditions:Sherpa

One of the great things about "owning" the media is that history is whatever you say it is.

Obama and the Democrats laid responsibility for the financial crisis squarely at the feet of Wallstreet, and pronounced themselves "the solution" to corporate greed and capitalism generally.

I'm pretty sure that the average American knows nothing about the Bush administration's pleading with Democrats in Congress to do something about Fannie Mae and Freddie Mac. Even the videotaped assurances of Barney Franks and various other prominent Democrats that there was "no problem" and no reason to change anything as far back as 2005, have been conveniently dumped down the memory hole.

I see no reason that this will change, even with Peter Wallison's expose of the damning statistics that prove that the Democrats blew up the economy on purpose.

...more interesting than the FHA's prospective losses on its 2007 and 2008 book are the agency's losses on its 2005 and 2006 guarantees, when the housing bubble was inflating at its fastest rate and there was no need for government support. FHA-backed loans during those years also have delinquency rates between 20% and 30%. These adverse results—not the result of a "policy" effort to shore up markets—pose a significant challenge to those who are trying to absolve the U.S. government of responsibility for the financial crisis.

Not surprising really--socialism is just another name for fascism, where the elite seize control of the economy so they can live like capitalists while everyone else lives like Ukrainians under Soviet rule. Obama and the Democrats spent 16 billion to save 30,000 state government jobs. Gotta take care of your own after all. Meanwhile, the people who pay the taxes that make these jobs possible are losing their homes left, right and center.

I encourage everyone to read the article, which confirms, not new revelations, but facts that are part of the public record and well-known--just not by Americans generally.

FACT 1. The Bush administration did NOT deregulate the financial markets.

FACT 2. The crisis was triggered by 25,000,000 sub-prime mortgages (nearly half of all mortgages).

FACT 3. The Crats blamed the mortgage brokers, but the reality is that mortgage brokers only sell "qualifying" mortgages. What that means is that the mortgage has to meet the specifications of the buyer--in this case Fannie Mae, Freddie Mac and the FHA. Those agencies bought 2/3rds of all the bad mortgages because they met their criteria for a qualifying mortgage.

FACT 4. The crisis started during the Clinton administration, when Democrats decided that mortgages should be "affordable" by low income people (or as it turned out--no income people).

Bernie Madoff is in prison for taking the life savings of thousands of people, but to date, no politician or political appointee involved with this scam is even in danger of indictment. Many have in fact walked away with multi-million dollar fortunes. One of the chief villains in all of this--Barney Frank, is more than likely to retire from Congress with a healthy pension and perhaps a public building or two named in his honor.

We've had revolutions for less...

The stock market has dropped 5% in the last 3 days, confounding expectations that Tuesday's GOP win in Massachusetts would send stocks up. I'm unfazed at the down move anyway as a species of 'buy the rumour, sell the confirmation', but the drop is generally blamed on Obama's Wednesday announcement of a hot war on Wall Street banks. The specifics aren't there yet, but the general drift is to prevent proprietary trading by banks and to spend time between now and election day in November demonizing bankers. I'll pass over Obama's economic illiteracy, but here's one take in the FT:

Worse, most people do not think Mr Obama can even command unity within his own administration on the Wall Street proposals amid growing speculation about whether Tim Geithner, the Treasury secretary, can survive in his job. Mr Geithner was conspicuously sidelined during Thursday’s announcement by the presence of Paul Volcker, the former Federal Reserve chairman, who lent his name to the push to rein in Wall Street banks.

The speculation about Mr Geithner is only likely to grow. “The Obama proposals were clearly politically motivated and came from the White House not the Treasury,” says a Democratic adviser to the administration, who withheld his name.

It's beginning to look like Ben Bernake, chairman of the Federal Reserve, will not be reconfirmed this weekend in a Senate vote.

Bernanke has public support from 40 senators, while 17 are publicly opposed to his reconfirmation. That leaves 43 senators uncommitted, and many have said they are concerned about Bernanke's record during his first years in office.

The WH and Senate leaders have expressed confidence they will have the votes they need. Still, underscoring the trouble some members have with Bernanke's renomination, even the top GOPer in the Senate, Mitch McConnell, has refused to disclose how he would vote.

Bernanke is no crook or bought-and-paid for political appointee. He was a breath of fresh air bringing greater transparency to the Federal Reserve, especially in comparison with his predecessor Alan Greenspan (he of inscrutable technical pronouncements...). Yet his academic background ill-prepared him to work the optics of Fed policy. His recent about-face, lowering the discount rate after reassuring markets for months that the sub-prime debacle had been contained, gave the impression that the Fed was engaged in a politically-motivated deception.

He might have survived the criticism except for a certain earthquake epi-centered in Massachusetts last week. The level of fear that has created in Washington is thick on the ground and the easiest way for incumbents to demonstrate their solidarity with the new public mood is to burn some witches.

The Senate can't get at Treasury-Secretary Geithner, who is legitimately responsible for the criminal mess (over 40 investigations and counting...) that's been made out of TARP, but they can send a message using the Bernanke confirmation.

The political necessity to appear 'concerned' and to be seen as 'acting' means that Bernanke will have the sins of the community placed on his head and then be sent out into the wilderness to perish.

Remember this?

Banks which take deposits will not be allowed to use their own money to take bets on markets, run hedge funds or make private equity investments through what he called the "Volcker rule" after former Federal Reserve chairman Paul Volcker.

He also wants to prevent further consolidation of the financial system in the US and will ban takeovers and mergers among American firms in the sector.

Obama said the new proposals would keep taxpayers from being "held hostage" by banks that have become "too big to fail" and that pose a risk to the entire financial system.

While I ambivalent about the treatment, the diagnosis is hard to argue with, which leads me to wonder whether we shouldn't apply the same logic to the sixth largest economy in the world.

Mr Dimon told investors at the Wall Street bank's annual meeting that "there could be contagion" if a state the size of California, the biggest of the United States, had problems making debt repayments. "Greece itself would not be an issue for this company, nor would any other country," said Mr Dimon. "We don't really foresee the European Union coming apart." The senior banker said that JP Morgan Chase and other US rivals are largely immune from the European debt crisis, as the risks have largely been hedged.

California however poses more of a risk, given the state's $20bn (£13.1bn) budget deficit, which Governor Arnold Schwarzenegger is desperately trying to reduce.

California is literally 'too big to fail', and that presents a long-term, systemic problem for the U.S. The implications of a federal bailout for the state are enormous, both in political and economic terms. We would in effect, no longer have a federal state, and the metamorphosis into France would be complete.

Time to break up the state.