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Letting banks fail is not an option as it will cause a run on all the other banks of all forms of creditors, David Roche, global strategist at Independent Strategy told CNBC.
Roche said the best strategy for troubled lenders is to support and refinance them, before selling them off.
"You have to support the banks while their capital is written down for their bad losses, refinance them, probably momentarily nationalize them, and then sell them off within two years," he said.
Roche, however, opposed the idea of nationalization if it means giving the government total control as it hinders progress and free market practice. Citibank is nationalized already, remarked Roche, as the government is calling all the shots.
"Essentially (the) government controls the shots and they want to force the bank to lend more money. Well since when is that progress?", questions Roche. "Since when is that a solution in line with free market practice? That's just destroying the allocation of capital and mispricing risk yet again."
Roche also warned against the problem of letting bad bank loans pile up, causing an increase in net losses to the global credit system.
"These loans aren't static", he said. "They are dynamic so they cause further loans to go bad. They cause the economy to get worse and the loan losses start to mount. It's like really having one bad apple in a basket."
On his investment strategy during this global crisis, Roche said he is short on the yen and bullish on gold, silver and platinum. He is also long on sovereign debt sellers, such as Ireland.
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