Will US nationalize its banks?

Jan. 26, 09 (UPI) -- The debate over nationalizing U.S. banks is running from Washington to Wall Street as the new administration grapples with grim bank news.

On ABC's "This Week," House Speaker Nancy Pelosi stopped short of a considering a full takeover of banks. "I'm not talking about total ownership," she said.

"Would we have ever thought we would see the day when we'd be using that terminology?" she asked.
"Nationalization of the banks?"

The government now owns 6 percent of Bank of America and 7.8 percent of Citigroup Inc.

However, it has also guaranteed toxic assets at these banks that could cost hundreds of billions of dollar, The New York Times reported Monday 1-26-09.

"The case for full nationalization is far stronger now than it was a few months ago," said Adam Posen, the deputy director of the Peterson Institute for International Economic.

"If you don't own the majority, you don't get to fire the management, to wipe out the shareholders, to declare that you are just going to take the losses and start over," he said.

The Obama administration is also considering a move to create a so-called "bad bank" that would serve as a repository for frozen assets until market conditions improve.

http://www.upi.com/Business_News/2009/01/26/Will_the_US_nationalize_banks/UPI-79971232982788/