The reason why bank nationalization hasn't been done

Roubini: Fully Nationalizing Citi and Bank of America Would Be Better

Posted Feb 27, 2009 06:15pm EST

Friday's announcement the government will convert up to $25 billion of its Citigroup preferred stock into common equity represents Uncle Sam's third direct attempt to rescue the floundering bank.

The conversion would give the government up to 36% control of Citigroup stock and leave existing common shareholders with as little as 26% of the company's common stock. That explains why the stock tumbled 39% to $1.50 Friday despite CEO Vikram Pandit's strange declaration: "In many ways for those people who have a concern about nationalization, this announcement should put those concerns to rest."

Pandit's claim is "like saying you're half-pregnant," says Nouriel Roubini and economics professor at NYU's Stern School and chairman of RGE Monitor.

"The government has already taken over the financial system," Roubini says, noting U.S. policymakers have committed $9 trillion to rescue the financial system and already spent $2 trillion. "So let's stop the delusion about 'no nationalization.'"

Roubini, who has publicly advocated for temporary nationalization of insolvent banks, says fully nationalizing Citigroup and/or Bank of America would have a minimal effect on the Dow, which is a price-weighted average. More importantly, he believes full nationalizations (vs. the current partial, piecemeal effort) would be better for the market and the economy because it's the first step in the process of cleaning up "bad" banks so they can later be sold back to private investors, i.e. "re-privatized", as was the case last year with IndyMac.
http://www.rgemonitor.com/roubini-monitor

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First, some definitions. Some would claim that we have "already" nationalized the banks via the TARP. I disagree - a capital injection is not "nationalization", although it shares some characteristics with one.

An FDIC takeover is also not "nationalization". In an FDIC takeover, such as happened with IndyMac Bank, the FDIC (a government agency) strips off the assets and liabilities and then either runs down the portfolios or sells them off. There is no intention to return the firm to private ownership or continue operating it in its present form - it is dissolved,

"Nationalization" is control of a financial or other institution by government while it continues to operate "transparently" for its customers and creditors.

Karl Denninger - The Market Ticker
http://market-ticker.org/archives/818-On-Bank-Nationalization.html


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Category:

Education

Tags:

• TickerGuy
• Karl
• Denninger
• Nouriel
• Roubini
• Bank
• Nationalization
• TARP
• FDIC
• takeover

[bazb1985]

Hmm, that was extremely interesting. What's the name of this gentleman? Where can I hear more of this interview? Thanks, and God bless you from the US.

[HamiDjoukou]

Karl Denninger, see the video info box for more info.

[brianD69]

If the government could not make social security and medicare payments because it cannot sell bonds, why not print it's own debt free money. Saving taxpayers trillions in taxes that pay for principal and interest. Banks create money out of thin air through fractional reserve banking so this would not cause anymore inflation than the system we have now.

[golfprobro4eagles]

This is all bull shit started by clinton. short term t bills. he may be right but it wont work you have to stop now if you keep doing it this guys way or there way we will keep going deaper. Roubini is right dont beleave this crap. hes a shill.

[mauiweddingvideo]

his channel is

 youtube com /user/kdenninger

Blessings,

Frederick