Comment & Debate
Rick Newman. “Bank Nationalization: It’s No Panacea”. Seeking Alpha. February 23, 2009 – Nationalization could easily incite a panic. If the government takes over one or two banks, the obvious question is how many more are in equally desperate shape. Shares in the entire banking sector would plummet even more than they have already. Short sellers, capitalizing on the panic, would drive shares even lower. The government could make a definitive statement limiting its acquisitions to a fixed number of banks, and no more. But to do that, it would have to know for sure that losses at other banks wouldn’t become equally insurmountable. And that’s the very thing nobody knows, since it depends on the depth of the recession and other factors that are far beyond anybody’s control at this point. If the feds nationalized a few banks, said they were done, and then found it necessary to nationalize a few more, that would look absolutely desperate and send the markets into a paroxysm.
Alan Blinder. “Nationalize? Hey, Not So Fast”. New York Times. March 7, 2009 – THE CONFIDENCE QUESTION Finally, because nationalization runs counter to deeply ingrained American traditions and attitudes, there is a danger that it might undermine rather than bolster confidence. As I said, this is not Sweden. The Treasury, of course, would never use “nationalization” in public; it would invent some nice euphemism. But the commentariat would not be so constrained.
William M. Isaac. “Bank Nationalization Isn’t the Answer”. Wall Street Journal. February 24, 2009 – People who should know better have been speculating publicly that the government might need to nationalize our largest banks. This irresponsible chatter is causing tremendous turmoil in financial markets. The Obama administration needs to make clear immediately that nationalization — government seizing control of ownership and operations of a company — is not a viable option.