It depends what you mean by nationalize.
The general idea is that the government takes control and ownership of an entity. Private owners or shareholders in the business risk losing all of their investment. Sometimes countries nationalize an entire industry by surprise, wiping out all investor interests. Sometimes they do so as a form of 'rescue'.
This actually happens all the time in the USA. Every bank failure is a case of bank nationalization. The FDIC steps in, takes control, and sells the bank to another bank over the weekend. So far in 2009 it's happened 14 times.
Bank failures:
In most cases, we say that the bank went into 'receivership' and was 'reprivatized' when sold to another bank. So what's all the fuss about 'nationalizing the banks'?The terminology about nationalization seems to refer to one of 2 things:
- Widespread nationalization of all banks
- Nationalization of larger banks - those that were thought 'too big to fail'
Will The USA Nationalize the Banks?
Right now we don't know.
Obama has indicated a preference not to, but he can't make any promises. If he says one thing and does another, then he faces a credibility problem.
Greater clarity on the question would be helpful. Some lawmakers, including traditional conservatives, hint that nationalizing the banks is necessary. Since we're getting mixed signals from Washington, there's nothing to guide us but rumors.
What do you think? Will the USA nationalize banks on a large scale? Is there any good way for lawmakers to signal ahead of time what their intentions and rules of engagement are?
I was a career banker, trained at one of the premier institutions, Manufacturers Hanover Trust. That bank is gone as are so many others without even considering Nationalization. So here is the concern! Banking has changed, deposit gathering has changed largely because of the internet. Time will continue to effect the deposit side making it easier and easier to transfer funds with the click of a mouse. You don’t a branch, everything will eventually be electronic. So, that is the liability side of the bank balance sheet-deposits are funds owed to depositors. Now here is the tricky part, the asset side. That is made up of loans and investments. The investments have gone sour, all the mortgage backed securities and the like. The loans are in trouble because the economy has been driven by consumer spending, largely through cashing out on real estate by borrowing more and more as prices kept going through the roof. All of a sudden the pot dries up and now the house of cards starts to fall.
Nationalization will do nothing to stem the tide of losses, it can’t. Suggesting that the banks should return to reckless lending is a real joke. That will just push the inevitable further into the future. We need a shake out, that is the only cure as painful as it will be, that’s what must happen and that will take time, lots of it.
I agree. The longer we put off the inevitable, the longer this mess will drag out. We need these businesses and real estate to fail so that we can see what they are actually worth instead of pumping funds into them to keep them on life support.