nationalizing banks?

Isa,

I see you're brushing up on your economic knowledge. Me too.

I'm sure there are other guys here who can answer this question better, but I'll give it a shot.

One of the big issues with nationalization is political. The US has historically been a very pro-free market country. While in other countries there are gov't owned oil companies, utilities, airlines, telecommunication companies, banks, mining companies, etc, the US has always had a negative view of gov't run enterprises. They are often viewed as inefficient, expensive and slow to react.

So you can imagine when someone suggests that the gov't buy enough of a banks stock to have a say in how it's run, many people get scared.

There is a real risk is that the gov't will start to throw its weight around once it has a large stake in a bank. It may start to pressure the company to make loans it wouldn't normally make or to support legislation that it wouldn't normally support.

However, there have been examples (there was one in Sweden) where the whole process went off pretty well. However, Sweden historically has had a very large presence in the market, so there was likely little opposition to idea in the first place.

RF