A couple weeks ago I wrote an article arguing that some form of bank nationalization was the only legitimate option for the Treasury Department to deal with the mortgage debt mess that is still dragging down Wall Street. Here’s an excerpt:
“At this point, I’m not so sure that private investors can be counted on to set the price for the simple reason that these assets will never regain their pre-crisis value, unless of course another bubble arises which we obviously don’t want to encourage. If the present value of future returns of the toxic assets is greater than the current market value then more buyers would be entering the market and more institutions would be selling. The fact that this isn’t happening shows that these mortgage-backed securities are as worthless as a pair of Bermuda shorts in the Artic.”
Here are two articles – “What Bank Nationalization Means For You” (WSJ) and “Bank Nationalization: Who Would Bear the Pain?” (BusinessWeek) – which address the nuts and bolts of the issue of bank nationalization.
In a recent poll by BusinessWeek, 41% of respondents favored nationalizing some banks and leaving the rest alone. I would tend to agree with that approach, starting with AIG and Citigroup. To nationalize or not to nationalize? What should Geithner do? Please provide your comments.
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