See What People Are Saying About... Nationalizing Banks


Whether it's called good bank/bad bank, troubled asset relief or some new acronym, the United States appears to be on a course that will lead to the effective nationalization of some of the largest U.S. lenders.

While the word "nationalization" is almost offense in our capitalist society, the end result may be the same. By carving out the bad assets that are blocking the normal flow of credit and then pumping taxpayer money into the remaining healthy part, the public's stake in these institutions may exceed private holdings.

"It's really a question of semantics and what you call nationalization," says Kenneth Rogoff, a Harvard University professor and former chief economist of the International Monetary Fund. "The banking system can't stand on its own at the moment and it needs to be cleaned up and recapitalized."

Rogoff, whose academic research has focused on banking crises, says the current U.S. situation is no different from what countries such as Sweden experienced in the 1990s, and there is a "pretty standard playbook" for how to resolve it.

In essence, the government takes over the troubled banks, separates the good and bad assets, and later resells the cleaned up bank to the private sector.

Typically, the bad assets sit in a publicly-funded "bad bank," and are eventually sold off -- however they're sold at a substantial loss to taxpayers.

And that leads to our Fast Money Reader Poll. Do you think the U.S. should takeover troubled banks, once and for all?

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