The Problem With Nationalization

M

MrDODGE

If the government chooses to nationalize a couple big banks (C, BAC) they will be required to nationalize all publicly traded banks after the market beats down the remaining banks to near zero.

Also, what do you think will happen to the overall market if they announce a pure nationalization? It will tank!
 
Market is gonna tank anyway so what's the difference. Instead of nationalizing, the FDIC should just close up all the shitty banks and run them until they can be disposed of.
 
By and large US banks have little access to equity capital anyway, just when was the last large offering?I think it was WFC when they bought wachovia, their stock tanked since them. Raising equity right now is probably extremely expensive and only the better banks can do it so one can argue that equity raising has been shutdown already for them. Preferred stocks are trading at 15% yields in the open market, raising there is very hard as well
 
I keep reading "no nationalization" articles and every time it is brought up by someone other than a newscaster or a message board poster it seems to grow legs. I'm none too bright but I sure can't see the government nationalizing the "too big to fail" banks.

But wtf do I know
 
Quote from MrDODGE:

If the government chooses to nationalize a couple big banks (C, BAC) they will be required to nationalize all publicly traded banks after the market beats down the remaining banks to near zero.

Also, what do you think will happen to the overall market if they announce a pure nationalization? It will tank!
More...

Excellent post.
And I believe that this is why Geithner was essentially "stalling" week before last with his "vague and ambigious" speech which was terribly lacking in specifics.

They know that BAC and Citi are insolvent and in need of Nationalization. And by actually announcing it, it would create a "run" on other large institutions like Wells and JPM, not too mention hammering shareholders to Zero.

Hence, the "stall".
 
If the government chooses to nationalize a couple big banks (C, BAC) they will be required to rebuild the Federal Reserve System. There is no place in our present system for nationalized banks. How would a nationalized bank deal with the federal reserve?
 
You must log in or register to reply here.
Back
Top