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Nouriel Roubini says nationalization is the right solution. Similiar to action taken in Sweden, where the government nationalized the banks, and then after fixing them privatized the banks. He thinks about six months from now would be good timing, as most of the banks will be insolvent by then. The government does not have the risk of disturbing other solvent banks, if at that time it just moved in and nationalized the banks. Obama has cover, because already Republicans like Graham are endorsing nationalization as an option. And Republicans would prefer nationalization over putting in trillions of dollars into banks, and letting good dollars go in after bad. Roubini says that between guarantees, liquidity support and capitalization, the government has provided between $7 trillion to $9 trillion to help the financial system. Defacto the government is already controlling a big chunk of the banking system he says. This would just make it official. Another reason for doing this, is that the earlier solution of taking one failed bank or financial institution and merging it with another, as was done for Merrill, Countrywide, Bear Stearns, WaMu, is like merging two zombie banks. The result is not a stronger institution but one that is just as weak as before. In his picturesque language he says its like having two drunks trying to keep each other standing. He would like to see the big bank split into three or four pieces, creating a number of regional or national banks that are stronger. Because nationalization has become the N-word he says, it could be referred to as temporary receivership. Has Roubini been more prescient than others? No, says Roubini, a number of other people got it right. Robert Shiller on the housing bubble, Steve Roach on asset and consumption bubbles, Ken Rogoff on global imbalances in the current account deficit. He says he put the dots together and gave a more fleshed out picture. This interview was conducted by a fellow Professor of Roubini's at the Stern School of Business of New York University, Tunku Varadarajan. What about Greenspan? I think he says, a belief in market economics led to an excessive ideological belief that there are no market failures and no issues of distortions of incentives. "Central banks were created to provide financial stability. Greenspan forgot this, and it was a mistake. I think there were ideological blinders, taking Ayn Rand's view of the world to an extreme." Did the media play its proper role as this situation developed with all its inherent dangers, asks Varadarajan. In the bubble years everybody became a cheerleader, and the media became a cheerleader. The tough questions were not asked, and there was a failure there says Roubini. They failed in one of the duties of good journalism. The Masters of the Universe were on the cover, the imperial CEO, private equity, and others, no one asked how is it that this guy is producing such high returns each year, is it because he is so smart, or because he is taking on so much risk that he may face bankruptcy in two years? ...

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Kenneth Lewis's thinking that the Merrill acquisition would work in September 2008, and the brutal markets in the months afterwards.His urgent meeting on December 17 with Paulson and Bernanke after learning of large new losses at Merrill. The decision to do what was he says patriotic and not cancell the deal leading to his staying mum on the meeting and on the huge new losses. Shareholder protest. Merrill's loss for the 4th quarter of 2008 was a huge and devastating $15.3 billion, leading to the firing of Merrill's John Thain for not disclosing everything he knew about the new losses.

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Letter to the Editors of the Wall Street Journal by Terry Barr, President of Samson Oil and Gas. He says the the oil well spill is not about an equipment failure- the failure of a fail-safe blow-out preventor (BOP) failing. It really is about human failure, and BP should admit that it is a human failure. When the well failed its casing integrity test no action to correct this was taken. And the data collected about critical monitoring of hydrocarbon flows was left to sit there without any acton. He takes issue with BP CEO Tony Hayward's presentation of this disaster. In fact Terry Barr says, its a result of BP not following the industry's existing well-construction policies.

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Japan's LDP party of prime minister Abe wins a majority in the elections for the upper house of parliament. Only about 32% of the voters cast their vote, compared to 40% in the previous upper house election. The LDP lacks the two thirds majority required to revise the Japanese constitution. It now controls both houses of parliament, making it possible for prime minister Abe to implement his economic policies.

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Only 8 months into office, the leader of the Democratic party in Japan, resigns as Prime Minister. After perceived indecisiveness by the Japanese public on the Okinawa base change issue and on issues related to cutting wasteful spending. The base issue related to a campaign promse to move the American base out of Okinawa and even out of Japan. The North Korean government's aggressive behaviour led to a changing perception of the base issue, with a lengthy disagreement with Washington and eventual reneging on the campaign promise. By this time Hatoyama's popularity dropped to 25% and he resigned. Also resigning is Mr Ozawa, the Democratic Party's secretary-general. The indecisiveness and lack of leadership on issues made it difficult to sustain the electoral support which led to the Democratic party winning an overall majority, mainly to bring change for the post Liberal Democrat era.

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Japan's new prime minister runs into difficulties in improving public finances by cutting some of the pork-barrel spending and making chages such as abolishing the gasoline tax to put more money in the hands of consumers. Cuts of wasteful spending came to less than a fourth of the target of $33 billion. The Finance Minister said that tax receipts for the year ending March 2010 would come in at $400 billion, about $100 billion less than estimated earlier, and this is less than the deficit for the current fiscal year of $590 billon.

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Japanese prime minister Noda setup a council to look at three energy options, the first to phase out nuclear energy completely by 2030, the second to reduce dependence to 15%, and the third to keep nuclear dependence at current level of 20-25%. Renewable energy use goes up from 10 to 20% under all the options. At one point it appeared that the government would choose the second option. Now with growing public opposition the government is considering the first option seriously to phase out nuclear energy. After the passage of the legislation doubling the sales tax to 10% in three years, and increasing unpopularity, the government is looking for ways to accomodate public opinion. Noda will now meet with nuclear protesters. A recent poll in the Asahi Shimbun shows 43% favoring zero-nuclear policy, and 31% supporting the 15% option, only 11% support keeping nuclear energy at the 20-25% option.

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Junichiro Koizumi's decision to support his son for the seat he held in Yokosuka, a naval port an hour from Tokyo. Fackler points out an astounding fact about second generation and third generation leaders in Japanese politics that make it an insider's terrritory. Second generation politicians in parliament make up an unusually large part of the legislature. About 40% of LDP party members of parliament are descendents of prior lawmakers. Of 7 prime ministers, only one was not a son or grandson of a former lawmaker. Shinzo Abe and Yasuo Fukuda were grandson and son of former prime ministers. Even the Democratic Party of Japan has its share of second generation members of parliament of about 20%. In this fascinating account of Japanese politics Fackler talks to Mr. Yokokume, a DPJ candidate running against the younger Koizumi, at his campaign offices. With a small fraction of the financing received by the younger Koizumi and voters at the train station telling him this is Koizumi country, Yokokume is worried that politics is for too long closed to outsiders in Japanese politics. Public opinion in Japan describes this in negative terms as depriving Japan of the fresh blood and new ideas from newcomers to politics to renew Japanese government....

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Japan's new prime minister Abe presents prospect of generational change for Japan. Uncertainty at the time of election by LDP, about direction Abe will take.

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Some insights into the thinking of Robert Rubin from an interview by Ken Brown and David Enrich with the former Treasury Secretary in the Clinton administration about the 2008 financial crisis. As Justice John Paul Stevens. the longest serving Supreme Court justice on the bench once said, those who administer the judicial system form the backbone of the law. In a like manner those who administer the financial and economic system form its backbone, which is why Rubin faces some tough questions in this interview. At the time he was Treasury Secretary, the NYT magazine ran a story on Robert Rubin, as the kind of person who liked to put things down rationally on a note pad, and think things through on the basis of this rational analysis. This is how he approached the Mexican financial crisis of 1994 and the 1997 Asian financial crisis. Here is some of that note pad Rubin, in the context of CDO's and risk taking, with something gone awry. Risks that according to this NYT report Rubin encouraged at Citigroup in 2004 and 2005, on the basis of the idea that Citi's competitors were taking on more risk and making bigger profits. His note pad approach appears to have led to conclusions by Rubin that considering the additional profits that could be made by Citi by ramping up the risk taking in 2004 and 2005 and afterwards like its competitors, it could lead to losses if things went wrong, but these losses would'nt come close to wiping out the profits made during the good times. The cyclical downturn he expected to see in 2004 and 2005 when he is reported to have added his voice to others that the bank take on more risk, was a cyclical downturn of the type he had seen during the 1994 Mexican devaluation and the 1997 Asian financial crisis. He had no idea that it would be a cyclical undervaluing of risk added on to a housing bubble, and to a triple A ratings issuance that was misguided. Rubin says here that there was hardly anyone who saw that low-probability event as a possibility. Was the housing bubble a low probability event, and were the issuance of ratings by the credit ratings agencies compromised by the drive for more business a normal pattern, or would some digging up of facts and some innate skepticism of the prevailing current in favor of one's own instincts that something was overdone missed in the notepad analysis of a supposedly rational approach? Or was there a feeling that somehow the U.S. with its long tradition of technology, its work ethic and sophisticated financial system was somehow immune to something as severe as what the Asian countries were experiencing in 1997, or what happened in the 1930's. Asked about his view of what happened Rubin says that looking back there was an enormous amount that needs to be learned. Rubin is also in a quandary when he has to respond to the public concerns about excessive executive compensation. Rubin made $115 million in pay since 1999, excluding stock options, while under his purview as the highest ranking board member Citigroup let some of the problems that it faces now accumulate. As Citigroup faces $20 billion in losses in 2008, a bear raid on its stock by short sellers who ironically were able to do this because of some of the lax regulation set in motion in the Rubin Greenspan years leading to the suspension of the Uptick rule, and the $45 billion government bailout last week. Rubin may have helped Citi but in a different sort of way. He was able to persuade Treasury- Treasury Secretary Paulson was a fellow executive at former employer Goldman Sachs- through the days before the bailout, ensuring government help was on its way. Citigroup shares had dropped to $3.77 a share in the third week of November 2008, losing 50% of their value in one week, as the discussions took place. ...

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Citadel, a large hedge fund headed by Kenneth Griffin is having problems, with its flagship fund down 35% this year. And the rumor mill saying some of its funds are down 60% and Fed Reserve officials are visiting the fund. Citadel is leveraged 3 to 1 and this is down from higher levels . Ironically Griffin has been known for buying other companies assets for pennies on the dollar, including E Trade and hedge funds Sowood Capital. And where did Griffin get started? He started trading in his dorm room at Harvard in the eighties. The hedge fund $1.7 trillion industry is facing a shakeout. It has already lost $180 billion in the August-October 2008 period and some hedge funds face collapse.

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Experts view Countrywide as being at the core of the problems at Bank of America, which has lost 60% of its share price in 2011.