Another day, another bevy of bank nationalization rumors. It is unsurprisingly crushing the banks, causing rational people to exit, and type converting the constituency for bank equity holders largely into the same people who buy lottery tickets at your local 7-11.
Here is John Hempton sagely on the subject:
But we are here in limbo. The nationalisation meme has taken hold – and nationalisation of some banks will happen. America is a current account deficit country – and almost all American banks need wholesale funding. There is none of that since the Lehman/WaMu week – and there will not be substantial wholesale funding until the rules are clear. All banks will fail in that environment.
The faster we come out with a good process – one which has nationalisation as one (but not the only) possible outcome then banks will continue to fail. And ad-hoc decisions will be made to bail them out or confiscate them. And we will be no wiser. And no closer to a solution.
More here.
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