New York University undergraduate and economics student Zachary Caceres wrote the following in response to his college newspaper's sympathy to government intervention in the economy.

To Jessie Yoh:

I enjoyed your column on Nationalization in today's WSN. However, I think you glossed-over the bigger issue related to our crisis and response.

In the early 20th century, Ludwig von Mises predicted that government interference in the economy, no matter how small, would necessitate further intervention to make their initial interference feasible. Price controls, for instance, require subsidies to keep businesses afloat that are barred from the natural outcomes of supply and demand. Today's downturn was rooted in just such a price control: The fixed interest rates and artificial expansion of credit by the Federal Reserve. This policy gives false signals to economic actors, encouraging the malinvestment of resources in unsustainable enterprises. This particular expansion -- because of other economic, but mostly political factors -- diverted itself chiefly into bubble activity in housing. It burst. This theory of the business cycle is not a fringe view; F.A. Hayek won the Nobel Prize for demonstrating its validity.

What we need right now is not to nationalize or to bail out any of the failed firms, but to allow the economy to reallocate the resources that have been put towards unfeasible goals. We only further squander wealth trying to prop up unsustainable enterprises. You claim that Jackson was wrong to oppose the Second National Bank and that it is equally as risky to 'allow executives who carelessly throw money around' to handle economic affairs. But they are one in the same: These massive firms are only sustained by government assistance and made so massive and rich by the fractional reserve system perpetuated by our central bank. The very danger that you criticize Jackson for opposing is precisely what gives rise to the continued existence of 'careless' 'money-throwing' CEOs. These men and their bankrupt organizations need to be allowed to collapse and more competent, careful, and frugal firms need to take their place. Neither bailouts and CERTAINLY not nationalization will achieve this end.

You also argue that the 'public's interest' would become the chief priority in the event of bank nationalization. Fannie Mae and Freddie Mac (government-sponsored enterprises) have not only contributed to the very mess we are trying to solve, but offer us a glimpse into just how a nationalized banking system would be run. These organizations acquire trillions of dollars of debt (somewhere in the neighborhood of 5 trillion, half the mortgages of the nation at last count), and create massive moral hazards in the financial system. If the government is guaranteeing an enterprise, people take undue risk on the basis that, if a storm comes, Uncle Sam will bail out their mistakes. Furthermore, the very people entrusted with the so-called 'public interest' have a long history -- in Fannie and Freddie themselves -- of walking away from their position of pseudo-civil service as multi-millionaires. Such public-spirited altruism!

You are absolutely right to say that nationalization is very likely and that it will probably occur under a pseudonym because of public skepticism. However a policy of nationalization is no more helpful or sustainable than the very policies that brought us to our present disaster. Until the government and the public at large is willing to reevaluate the premises of interventionism, there is no end to our woes in sight.

The article to which Zachary Caceres is responding can be found here:  http://www.nyunews.com/opinion/columnists/nationalization_of_banks_is_coming-1.1593928