What do we mean by nationalization?

More

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.


Jump to comments
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.

Get Today's Top Stories in Your Inbox (preview)

A Technicolor Time-Lapse of Alaska's Northern Lights

The beauty of aurora borealis, as seen from America's last frontier


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

A Time-Lapse of Alaska's Northern Lights

The beauty of aurora borealis, as seen from America's last frontier

Video

What Do You Wish You Learned in College?

Ivy League academics reveal their undergrad regrets

Video

Famous Movies, Reimagined

From Apocalypse Now to The Lord of the Rings, this clever video puts a new spin on Hollywood's greatest hits.

Video

What Is a City?

Cities are like nothing else on Earth.

Video

CrossFit Versus Yoga: Choose a Side

How a workout becomes a social identity

Video

In Online Dating, Everyone's a Little Bit Racist

The co-founder of OKCupid shares findings from his analysis of millions of users' data.

Writers

Up
Down

More in Business

Just In