Have I Mentioned Nationalization?

Obama was flat out asked about nationalization of banks. His response is effectively that we are not like Sweden -they had five banks we have thousands. He ignores a couple of key points here. First, like it or not, the FDIC is going to be doing something akin to nationalization on a grand scale this year and next, especially for smaller regional banks. They are already up to nine this year and I suspect the pace will advance. Second, as Calculated Risk points out, there are only a handful of key large institutions that need to be nationalized, so we are not so different from Sweden. And as Calculated Risk points out, the Japan model is the alternative mentioned by Obama and we have good proof - as in Japan - that its model did not work. So we are not doing a plan that worked because we think we are different, but we are doing a plan that is proven wrong. I have more doubt by the day.

http://www.calculatedriskblog.com/2009/02/obama-on-nationalization.html

And Geithner's plan to have a public/private plan to support banks is a bit laughable on the private side. I do not see private capital going to such risky places when there are so many good companies at wonderful valuations at the moment.

Let's think for a moment about the problems with these financial institutions and why it might be better to put them out of their pain:

1. Their traditional means of making money - good money - are mostly gone or totally shot. They are not likely to make significant profit, even without the losses on toxic debt, for years to come.
2. So with little promise of future profit, how long do you think it will take them to pay off their tens, even hundreds, of billion in debt to us taxpayers? Take your time and respond when you feel comfortable. I am guessing it is a longer window than most private investors/speculators are willing to wait.
3. The toxic assets keep going more toxic all the time. And they will do so for some time. We are in a downward spiral and I do not see us getting out of it soon.
4. The management that got the financial institutions into this mess is still in charge. How much faith do you have in their ability to turn things around?

Just a few thoughts to chew on. Doesn't that nationalization thingy sound worth a bit more thought now?

Disclosures: None