U.S. Banking Crisis: Is Nationalization the Answer? [View article]
There is nothing to suggest that government wishes to pursue a broadly based policy of nationalization under which it would either own all banks outright indefinitely or own all banks temporarily.
So until more details are released, we have to look at what has been said and read between the lines and rely upon and our own thinking and the thoughts of those close to the unfolding process.
As part of the stress test, bank regulators will consider how much capital a bank has left if it were to register its losses immediately. The test is expected to also examine a bank's capital position over the next two or three years by taking into consideration its losses over that period.
Each bank's tax position and what credits they have available will be examined as well.
Depending on the level of failure discovered through the stress test, the government may take convertible preferred shares, or if a bank is clearly insolvent, some believe bank regulators will effectively nationalize it by taking over common stock and putting in a board of trustees made up of current bank managers.
Should the government take this route, it will be called something other than nationalization as they are on record as not wanting to nationalize banks.
After taking effective ownership, the government will attemp to arrange shotgun marriages or may be forced to break down the assets of the acquired bank into good and bad assets. The good assets could easily be sold off and the bad assets may need to be held by an aggregator until the public-private partnership is up and running.
All deposits would be insured by the FDIC and the only question is how hard would the bond holders of the acquired bank be hit.
U.S. Banking Crisis: Is Nationalization the Answer? [View article]
So until more details are released, we have to look at what has been said and read between the lines and rely upon and our own thinking and the thoughts of those close to the unfolding process.
As part of the stress test, bank regulators will consider how much capital a bank has left if it were to register its losses immediately. The test is expected to also examine a bank's capital position over the next two or three years by taking into consideration its losses over that period.
Each bank's tax position and what credits they have available will be examined as well.
Depending on the level of failure discovered through the stress test, the government may take convertible preferred shares, or if a bank is clearly insolvent, some believe bank regulators will effectively nationalize it by taking over common stock and putting in a board of trustees made up of current bank managers.
Should the government take this route, it will be called something other than nationalization as they are on record as not wanting to nationalize banks.
After taking effective ownership, the government will attemp to arrange shotgun marriages or may be forced to break down the assets of the acquired bank into good and bad assets. The good assets could easily be sold off and the bad assets may need to be held by an aggregator until the public-private partnership is up and running.
All deposits would be insured by the FDIC and the only question is how hard would the bond holders of the acquired bank be hit.