Alan Blinder: Clueless or a Liar

Yves at Naked Capitalism says most of what needs to be said about this Alan Blinder op-ed in the New York Times. But it's worth reiterating just how much Blinder misrepresents the terms of the debate. The most glaring example is when Blinder writes that:

Another argument is that banks’ dodgy assets are hard to value, making it impossible to know how much capital they need — and probably very expensive to provide it. True again. But nationalization doesn’t make these problems disappear.

If the government takes over a bank, the taxpayers tacitly acquire its assets, thereby inheriting all the uncertainties over valuation. And if a bank has negative net worth when it is nationalized, who do you think fills the hole?

This is patently untrue. The entire point of temporary nationalization is that regulators don't have to price toxic assets; they can simply buy the bank, and then split it into good and bad halves. This is why Alan Greenspan came out in favor of putting insolvent banks into receivership. The good half can be sold back to private investors rather quickly. The bad assets can be held indefinitely, and sold to investors, hopefully as the market for them recovers, like was done with the RTC during the S&L crisis. Of course, if these assets really are worthless, as seems likely, then the taxpayers will end up eating the losses. But at least the taxpayers will have gotten the upside from selling the good half of the bank, and we won't have merely subsidized bankers by giving them cash for trash.

Alan Blinder either does not know what he is talking about, or is intellectually dishonest. Which is worse?