Comment & Debate
David Leonardt. “More Than One Way to Take Over a Bank”. New York Times. February 25, 2009 – The second version of nationalization is the one that today’s advocates point to. It is a temporary takeover born out of crisis. Sweden pursued this kind of strategy in the early 1990s to clean up its banking system.Even the United States has nationalized banks on occasion, including IndyMac Bank last year.
In these cases and others, the government had none of the grand ambitions that Mitterrand-style nationalizers had. The same would clearly be the case with a nationalization of banks today. “Nobody in their right mind wants the government to be in the banking business any longer than it needs to be,” said Adam Posen, an economist in Washington and a prominent voice for nationalization. Instead, the federal government would declare a bank insolvent, wipe out its existing shareholders, fire its top executives and inject enough money to keep it functioning. The government could then siphon off the worst assets into a so-called bad bank — pooling them with toxic assets from other nationalized banks — and resell the bank’s healthy parts to private investors. Once the crisis lifts, some of the toxic assets may even have value.