If I Noticed This, Perhaps NPR Should Too

Listening to Morning Edition this, uh, morning, I did an aural double-take when Ari Shapiro asked about bank bailouts while talking to Raghuram Rajan of the University of Chicago Booth School of Business:

Shapiro: Or should the government just say, "We're going to buy you up so we don't have to keep dumping money into you"?

Rajan: There is this question of nationalization that keeps coming up. When the government actually owns these banks, it becomes responsible for all the liabilities of the banks. Supposing the government goes in and replaces the equity holders and says now these are government-owned banks. Then the government becomes responsible to all the debt holders who otherwise have made losses. In other words, with a nationalization, what you get is a transfer of wealth from the taxpayer to all the bondholders who earlier were dependent on the private bank to repay them. Now [they] can depend on the full faith and credit of the government to repay them.

That's just not true, and if I know it, then surely Ari Shapiro should. Hell, he's doing the story.

Don't take my word for it, though. Here's Dean Baker.