Nationalization by autumn, bank on it

[Joanne98]

Like it or not the United States will be forced to nationalize large swathes of its banking system by the time the leaves fall from the trees in Washington.

The tragedy is that we will have to wait that long and that the costs will mount.

The plan to rescue the banks, or, er, the people, as enunciated by Treasury Secretary Geithner, is no plan, only an apparent set of contradictory principles: an ideological one not to nationalize and a political one not to subsidize too obviously.

The plan will fail unless the administration comes out in favor of either subsidy or seizure of failing banks. Either the United States will be forced to nationalize when that becomes apparent or perhaps it is waiting until that failure makes nationalization more politically palatable.

In either event, it is a terrible mistake and the cost will only grow, both in direct terms for taxpayers and more broadly for the growing number of people with too little income to pay tax.

Geithner laid out a plan to apply stress tests to large banks and require those that do not pass either to raise capital (from whom exactly, I hear you ask) or to accept an injection of convertible securities from the government on terms that have not been defined. Banks that take government coin will have limits placed on their compensation and other actions.

There is $500 billion to $1 trillion to fund an aggregator bank which will “partner” with private capital and set prices for distressed bank assets, presumably with some sort of insurance wrapper to limit private capital’s downside. There are also measures intended to generate lending directly to consumers, house buyers and businesses.

All in all, it’s a bit like watching a man trying to eat a steak without using his teeth

http://blogs.reuters.com/great-debate/2009/02/13/nationalisation-by-autumn-bank-on-it/

[Mike 03]

1. Our banks ARE being nationalized. Is this news? And it won't happen next Autumn, it is

happening now. And I think it's necessary. The worst kept secret in the world is that many of our major banks are insolvent.

[CoffeeCat]

2. What does that mean for us?

When the banks are nationalized, what does that mean for the average American?

What changes will we see?

Is the potential for corruption or theft a concern?

What about the employees of these banks? Should people who are employed by BofA, Wells Fargo and the other
banks be concerned?

[Mike 03]

3. Please don't worry. It won't mean anything.

When people us that word "Nationalization," they are using it the way our grandparents used the word "Communism."

They don't know what it means. All it means is that a problem is so big that the government has to get involved to avert catastrophe.

But you are asking a great question.

[Mike 03]

4. K and R. NT

[bonito]

5. Yep

http://www.rgemonitor.com/blog/roubini

[wuvuj]

6. No panic?

I think they are trying to fix the problem without panicking the markets...stock and so forth? Trying to keep the stock market and others from taking another leg down. The finance sector needs to participate for any market rally...and it is weak....no one wants to own bank stocks if they think they will lose their shirts? It's basically soft "nationalization"...it's either that or "eat the rich"?




I just saw a bit on the news about mortgage derivatives...of the 3 tiers...the middle one is now worth $.02 on the dollar if I read it right...if things get worse the so-called AAAs will follow?

The reaction to the PLAN wasn't due to it's lack of details....it was due to a "lack of a free lunch" for bankers...the writing is on the wall?

Tell me this isn't another depression. Please..............