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Should U.S. Nationalize Banks?

Propping them up with taxpayer-funded capital injections didn't help enough, it seems. Now there's growing talk (from both major political parties) about nationalizing the most troubled of the big banks.

Nationalization is tantamount to full governmental control of an institution - presumably, with the idea of whipping it into shape for eventual return to the private sector, via an IPO or other means. That was done successfully with freight-railroad Conrail some two decades ago. To a degree, it's also what happens when the FDIC takes over failing institutions (although in that case the institutions generally are broken up and their assets sold off as quickly as possible).

Is nationalization the best remaining option to stave off collapse of one or more of the biggest banks?

If you are / were out of work, would you consider applying to work at a bank that was nationalized?

If you work for an institution that becomes nationalized, how do you think it would affect your prospects for compensation and advancement in that company? Would you redouble your efforts to find employment elsewhere? (Be realistic.)

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AUTHOReFinancialCareers News Insider Comment
  • ha
    harvardpipi
    21 April 2009

    With all respection to anyone who agree with the nationalization of banks, I am actually oppost it. There are couple of reasons:

    1. Restructure of banks shall do the very same thing a nationalization does. I am not talking about wiping out shareholders. But if banks need capital then government should inject capital to make them viable.

    2. Clean up all the fat cats on wall street. Executive pay should be capped regardless TARP money received.

    -Bin Fang, Ph.D

  • Ha
    Hank
    17 March 2009

    To the idiots that think nationalization would be a good thing....go work in the post office....you aren't cut out for finance in a free market............and the fact that you don't even have a clue as to what caused this debacle shows you should ask for a refund from the institution you graduated from.......
    Look up the terms FED and FASB and try to understand FAS157 in context of a 4% interest rate hike by the FED...called the FASB INDUCED BANK DEATH SPIRAL...............jiminy......what retards

  • Ju
    Jucival
    5 March 2009

    Nationalization is a tame term for a concept that is paradoxically radical and boring. It's radical in that banks would have to issue equity to the government, a process that wiped out current shareholders. Yes, that would mean most bank stocks would go to zero. It's boring in that it would allow the banks to be run completely differently going forward in that they wouldn't have to answer to shareholders on a quarterly basis, they wouldn't be able to pay high salaries to executives and they would make loans that the government believed were in the public interest. Of course, the government would say the banks would be privatized eventually, but realistically it could be decades.
    To be sure, the landscape of world business would change dramatically. Private owners have made a mess of things, but you can bet government bureaucrats would be worse. They probably would take fewer smart risks, such as lending money to large companies and more dumb ones, like giving mortgages to low-income families with meager means of repayment.

    They would almost certainly not support lending to hedge funds or providing money for leveraged buyouts, or do much merger-and-acquisition financing at all

  • We
    Wes
    4 March 2009

    Most financial institutions have been effectively nationalized even if most Americans are averse to saying such a thing. However, the more important issue is that many of these institutions are insolvent and easy liquidity delayed exposing this simple fact. Therefore, in order to speed this process, it's best to divide financial institutions into 3 categories: Insolvent, weak, strong but lacking liquidity. Bring the insolvent and weak under full control and immediately liquidate the insolvent zombies and sell pieces of the weak. We will get there eventually with the currently tortuous tack our policy makers have us on.

  • Ad
    Adam
    4 March 2009

    Communism leads to poverty, murder and chaos. It will come, and all of the useful idiots (Lenin's term) stating that nationalization is "good for the economy" will smart for it.

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