I also agree that Citi, BofA and the other "too big to fail" banks
will be nationalized (placed into federal receivership).
However, I think a better way of saying the same thing is this:
Let the FDIC do its job. Take over all of the "too big to fail" banks
at the same time and get them on their feet as quickly as possible.
Besides providing insurance to individual account holders, one of
the major functions of the FDIC is to take over failing banks
(place them in receivership). Then they sell off the bad assets,
keep the good assets, recapitalize what's left of the banks and
return them to the private sector once they become profitable.
How do they become "profitable" again? Simple --- they start making money
by lending to their customers while in receivership. Once they establish a
clear pattern of profitability, only then would the FDIC allow the banks to return
to the private sector.
Since all of the banks would be taken over at the same time, there would
be less of a stigma attached to being placed into receivership. It would also
be easier for the FDIC to establish prices for the "bad assets" because they
could evaluate them all at once. If the too big to fail banks go into receivership
one or two at a time, then the remaining banks could suffer additional losses,
which just means more money that they'd need down the road.
Yes, this would cost a lot of money. But it would actually cost less money
over the long run than doling out billions to banks that have no intention of
lending the money...which means their share values continue to plummet...
which means they continue to lose money....which means they need even
more money from the Fed just to stay afloat.
I say let's do this thing in one fell swoop and be done with it. All of this
footdragging doesn't do anyone any good. And besides, since the banks
have taken so much taxpayer money already they're pretty much nationalized
as it is...
CanDo
"The right attitude is everything"
Starting Score (2/2010): TU-767, EQ-745
