Let’s talk bank nationalization, folks.
Why? because I think there is a pretty good chance it is coming soon–especially when talking about Citi and Bank of America–and, more important, THAT might have the biggest impact yet on solving (or helping to solve) the ever growing mortgage crisis that is still feeding the global credit meltdown.
To a large degree, Citi and BofA have already been nationalized–they would have gone under long ago had it not been for OUR money keeping them propped up. But, with true nationalization, we, the people, in the form of our elected government, would actually be running the banks, too.
We’d change the entire management structure; re-write the charters; open up the lending spigots.
As it is now, but I don’t think for very much longer, we own them, but we don’t run them, which is why we’ve seen these banks take our money and use it for executive pay (for the very same people who ran these financial institutions into the ground) and for 200 thousand dollar, full-page New York Times ads telling us all how great they really are!
Right now, a key reason the over all market continues dropping is fear that the government will assume full control of these banks thus wiping out current shareholders. So, this is as good a time as any to cut the losses, tell shareholders–sorry, but YOU are about to feel some pain along with the rest of us–and do what should have been done months ago–truly nationalize some of the key banks fueling this financial crisis. Besides, share prices have lost so much value, some shareholders may actually thank us for putting them out of their misery.
Americans have an irrational fear of the word nationalization, which is funny because, as I said, we already, in effect, HAVE nationalized these institutions but we are not getting any bank bang for our shrinking buck.
Citi and BofA are, as we keep hearing, too big to fail. We keep hearing it because it is true! But true nationalization is not the same thing as failure. To the contrary, it would be a sign that we realize the medicine must be potent if we are going to try and treat a potentially fatal disease.
And, you know what? I think our government gets that. I think that although it publicly likes to say that the government does a rotten job running banks, it knows that the government could not do any worse a job running the banks than the banks have been doing all by themselves, thank you.
That is why I think we are likely very soon to see the government take that not so giant leap from quasi-nationalization to actual nationalization when it comes to certain banks–for starters, Citi and Bank of America.
That, in turn, many experts believe, will be the primer needed to get credit flowing again…to pump that money back into the real estate market…to help people head off foreclosure while affording others an opportunity to seriously consider jumping into the housing market to start buying up that surplus that is keeping home prices severely depressed.
Now some may think the word nationalization is a dirty word in America. Okay, fine. Think that. But now substitute the word SALVATION for nationalization and all of a sudden the whole concept fits in very nicely with the American ethos.
We are getting very close, then, I believe, to the true salvation of the U.S. banking industry. There, now doesn’t that just feel a lot better?