The warmth and excitement of our welcome for President Barack Obama this week, underlines how estranged Canada had become from the United States over the last seven or eight years.

Mr. Obama’s substantive performance at Thursday’s press conference in Ottawa reminded us of his cool and intelligence. He was well briefed and sensitive to Canadian interests even though he nearly replaced Ottawa with “Iowa”.

The imagery was most interesting. Obama was relaxed, smiling and very much in control.

Harper seemed anxious, trying to please, attempting to make a good impression. Michael Ignatieff appeared tongue-tied in his photo-op with Obama. Only Governor General Michaëlle Jean seemed relaxed in the President’s company.

Obama’s discussion with the Prime Minister touched on a number of points from Afghanistan to the U.S./Canada border, to the carbon footprints of U.S. coal and the Alberta oil-sands, to trade and border security. They talked about the auto industry and the respective economic stimulus packages of the two countries, Canada’s concerns about “Buy American” provisions in the U.S. package and the U.S. financial industry.

On the matter of border security, Mr. Harper made it very clear that U.S. security is as important to Canada as it is to the United States and I applaud him for that. Mr. Harper was also quick to point out that our economic problems, although linked through our trading relationship are somewhat different from the U.S. problems, particularly in the areas of healthcare, housing and banking.

Canada’s problems are driven by crashing oil prices and a collapse in demand for our natural resources, automobiles and other manufactured products. Fortunately, our banking system remains strong. An article published in Newsweek Magazine earlier this month says that in 2008, the World Economic Forum ranked Canada's banking system the healthiest in the world. America's ranked 40th, Britain's 44th.

Nationalization of banks in the United States is now being openly discussed. It was the dominant item on CNN Wednesday. On Thursday, former Chairman of the U.S. Federal Reserve Alan Greenspan, who for decades was regarded as the high priest of laisser-faire capitalism in the United States, came out in favor of nationalizing some U.S. banks.

In an interview with the Financial Times of London, he said nationalization could be the least of all evils for policymakers. "It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring," he said.

The former Reserve Chairman said temporary government ownership would "allow the government to transfer toxic assets to a bad bank without the problem of how to price them."
Nobel prize-winning economist Joseph Stiglitz says nationalized banks are the "only answer.

“We live in a very different world than the world of the Great Depression. Then, we had a manufacturing economy. Now we have a service-sector economy”. In the Great Depression we didn't have a safety net. Now we have unemployment insurance.

The U.S. government has poured hundreds of billions of dollars into the U.S. banking system, to little effect. U.S. banks continue to fail. American taxpayers have already become owners in a large number of banks. With the state as sole owner, executives and board members could be fired without golden handshakes. Managers could be incentivized by linking remuneration to multi-year profitability.

Full public ownership of the banks could facilitate the creation of a ‘bad bank’ that would hold on its balance sheet all the toxic assets (assets of uncertain value not easily convertible to cash) currently held by the U.S. banks. The bad bank, holding the toxic assets would collect the cash flows associated with them until a liquid market for these assets could be established. The publicly-owned banks could be re-privatized when financial markets stabilize and the economy recovers.

The logic of bank nationalization in the American (and British) context could make sense but the Americans will have a problem with it, a problem that traces back to the declaration of American independence. It’s about their perception of freedom and independence, the sanctity of free markets and the perception they will self-correct.

The natural reflex of most Americans is that government interference in the private sector is not a good idea, yet they crave it for healthcare and other social programs. The auto industry will soon be on government life-support.

Leaders of the U.S. financial industry have become abject failures. Their banks or financial institutions have already been exempted from market discipline, i.e. bankruptcy, thanks to state intervention.

The very fact that they operated with minimal government oversight, drove themselves to the verge of bankruptcy and managed to make themselves so essential that they cannot be permitted to collapse suggests they cannot be left in the hands of their current owners.

W.E. (Bill) Belliveau is a Shediac resident and Moncton business consultant. He can be contacted at bill.bellstrategic@nb.aibn.com Atlantic Insight is a published Blog inventory of opinion articles published weekly in New Brunswick's print media as written by W.E. (Bill) Belliveau, who is a resident of Shediac, New Brunswick, and small business owner, operating his Moncton-based marketing consultancy, Bell Strategic. He can be reached by e-mail at mailto:bill.bellstrategic@nb.aibn.com