Bank Nationalization: No Longer A Dirty Word
Last night, with Jim Cramer and Melissa Lee, I was speaking about how odd it was that bank nationalization was suddenly a hot topic among traders.
"Odd" because a month ago you would have been stoned on Wall Street for bringing up the topic, because—everyone knows—the government would do a terrible job managing private assets.
But now, as the situation has become more dire, and as bank stocks again swoon as regulators are descending upon the banks to begin collecting data for Treasury's "stress test," the word "nationalization" is being heard on the Street as a legitimate alternative to the plans that have been floated. It’s a sign of how worried—desperate—the Street has become.
Today, the growing minority supporting this was given support by none other than Allan Greenspan, who told the FT that he supported nationalization of some banks (on a "temporary" basis, whatever that means).
Not only that, but Republican Senators like Lindsey Graham are also floating trial balloons, saying that nationalization should at least be considered in lieu of sending billions more down a black hole.
In lieu of the word "nationalization," some are using the less offensive term "Swedish model," but don't be fooled by that. It would:
1) Nationalize the weakest banks, and
2) Auction off assets after cleaning up balance sheets.
Mr. Geithner will soon be presenting details of his "public/private partnership" to help banks. Once that plan is presented, expect nationalization to emerge as a credible alternative to parts of that plan.
- Housing Plan: $275 Billion to Help 9 Million Families
Questions? Comments? email@example.com