What do we mean by nationalization?

Commenter Yancey Ward makes what I think is a key point:

If, by nationalization, we mean that depositors get their contractual insurance and the banks get carved up and liquidated like they have been done in the past, then nationalization is the answer.

However, that is clearly not what is being discussed. We are discussing nationalization in the context of propping the presently insolvent banks. All these calls for the wiping out of the shareholders is missing the forest for the trees- the market has already wiped them out. People that loaned money to these banks need to be wiped out also, but this is not in any of the plans being discussed.

If nationalization is just a way to take control of the downsizing and ensure that equity shareholders and creditors don't profit at the expense of the taxpayer, all well and good.  If it is a way to avoid recognizing the full extent of the losses as quickly as possible, not so much.

Perhaps the thing to do is triage the banks:  identify (and certify) those that can get along without capital; liquidate and sell off the no-hopers to group one; and laying out clear steps for getting the banks in the middle group back onto solid ground.  This is approximately what FDR did, and while the certification process was jerry-rigged and probably more than occasionally wrong, the restoration of confidence in the banks that stayed open was very helpful.


Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

The 86-Year-Old Farmer Who Won't Quit

A filmmaker returns to his hometown to profile his neighbor, the patriarch of a 70-acre family farm

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

The 86-Year-Old Farmer Who Won't Quit

A filmmaker returns to his hometown to profile the patriarch of a family farm

Video

Riding Unicycles in a Cave

"If you fall down and break your leg, there's no way out."

Video

Carrot: A Pitch-Perfect Satire of Tech

"It's not just a vegetable. It's what a vegetable should be."

Video

An Ingenious 360-Degree Time-Lapse

Watch the world become a cartoonishly small playground

Video

The Benefits of Living Alone on a Mountain

"You really have to love solitary time by yourself."

More in Business

Just In