Well, what are the alternatives? That is the thing, nationalization is a lot more market friendly, actually, then the alternatives. If it wasnt for the cultural aspects of it, it would have been done a long time ago.
Here are the alternatives you have:
- do nothing, let the banks fail. The govt. would still need to spend massive amounts of money because of the insured deposits. After spending this massive amount, the banks would still have failed and we would officially be in great depression territory. In fact, we would be worse than that, because of the size of the banks that are about to fail. It might be satisfying on some personal level, but it would be the general population who would lose money, twice. In fact, the future generation would be paying for the debts of the past, just in a much more painful way.
- Bail the banks out by providing capital to generate liquidity. The problem with this is that it is basically free money for the bank's shareholders. The tax payer would be pumping a lot of money into the banks without any sort of stake to potentially revert the losses in the future.
- The government buys the banks, makes them liquid, and sells them. That is, instead of rewarding the stockholders of the banks, the govt. buys the banks at their current very low price, then it injects the money to make them solvent, and then at least partially recovers that by reselling the stocks of a now solvent bank.
People are put off by the "N" word, but this would be nothing like the nationalizations of the 50s and 60s, when governments bought companies to run it themselves, as opposed to fixing it and reselling it.
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