The financial crisis grows weirder by the day. When philosophical conservatives like Alan Greenspan start talking about nationalizing banks, you know you’ve passed into some kind of parallel universe. Why are so many people entertaining an idea that sounds vaguely Marxian?
The answer, I think, is simple. There are some pretty sick banks in America right now, some of which may not be viable in the long run. But putting a giant bank through bankruptcy is unthinkable. (Remember Lehman Brothers). So why not just bite the proverbial bullet and nationalize them?
Mr. Blinder believes in biting the bullet, but it matters which bullet you bite. Like Ben Bernanke, the Federal Reserve chairman, and Timothy Geithner, the Treasury secretary, he is not convinced that nationalization is the only, or even the best, way out.
Because “nationalization” can mean many things, let’s first clarify what the current debate is about. Don’t think Hugo Chavez or even Clement Attlee. Imagine instead that the government acquires a majority interest in — or perhaps 100 percent of — a bank, wipes out the existing shareholders and installs new managers. Then, sometime later, a healthy bank is sold back into private hands, and we all live happily ever after. At least that’s the idea.
Further in the article, Alan Blinders wonders where they need to draw the line. This is a very interesting question in my opinion. First of all, how do you decide whether a bank ‘deserves’ to be overtaken by the government or not. Secondly where do you stop, once you start?
Supposing that we nationalize four banks, this could mean a severe disadvantage for bank five. But we simply cannot ignore the financial problems like the government did with Lehman Brothers. Imagine that more banks go bankrupt, this would mean a huge disaster both for the financial world as for the employees. Like I said in my previous blogs, there is also the fact that the Americans want to hold on to their traditions. They simply refuse to lower the price for gasoline for example. And that is why I fear that American politicians can not sell such a ‘communist action’ as a bank nationalization to the American population.
Source: http://www.nytimes.com/2009/03/08/business/08view.html?_r=1&ref=business
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Nationalizing a bank is according to me, an emergency measure. Only banks that are as good as bankrupt should be nationalized by the government. I also think that nationalizing four banks at once isn’t a real good idea. It would cost a lot of money at once for the government and in the end it are the American people who have to turn op for this. I also agree with the fact that this would be unfair to other banks that are having financial problems. Also, nationalizing banks is a social measure and as far as I can remember America is a capitalistic country. It wouldn’t “feel” correct for the American society.
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