What's Cheaper?

by Patrick Appel
Tyler Cowen a post on the perils of bank nationalization over at the Atlantic's new business channel:

The risk is that nationalization becomes a contagious idea and spreads from one bank to the next, acting as a self-fulfilling prophecy.  Even mentioning "the N word" scares off private capital, so if the government is not going to nationalize, a precommittment to that effect would be useful.  Either that, or get it over with.

Subsidies and bailouts, of course, have their own problems, most of all that they cost money.  But it also costs money to recapitalize a nationalized banking system.  I've yet to see the evidence that the nationalization option would be cheaper.  And if nationalization increases the number of banks that require assistance, one way or the other, it could well prove more expensive in the longer run.