Let's make again a point or two that I have been making for at least six months. To paraphrase and quote Paul Krugman in his blog (Feb. 20): "When talking nationalization of banks, one is not talking about leftist radicals expropriating perfectly good private companies. At least since last fall the major banks — certainly Citigroup and Bank of America — have only been able to stay in business because their counterparties believe that there’s an implicit federal guarantee on their obligations. The banks are already, in a fundamental sense, wards of the state.
And the market caps of these banks did not reflect investors’ assessment of the difference in value between their assets and their liabilities. Instead, it largely — and probably totally — reflected the “Geithner put”, the hope that the feds would bail them out in a way that handed a significant windfall gain to stockholders.
What’s happening now is a growing sense that the federal government, in return for rescuing these institutions, will demand the same thing a private-sector white knight would have demanded — namely, ownership."
So, to repeat whay I have been saying for a very long time, and what Paul also wrote. What the government demands, in a nationalization, is exactly what new investors demand, in a new round of venture capital investment, namely, ownership. If the preceding owners do not like it, they can always come up with new money.
Another interest in a nationalization is to fire managers who have demonstrated that they were incompetent, and replace them, with competent managers.
Several French banks just published profits in the billions of Euros (Societe Generale doubled its profits to two billions). So it is not because one manages a giant bank that one is incompetent, or corrupt (like some managers at UBS).
There are strictly no contradictions between nationalization and the capitalist system or the principles of ownership. It is simply a case when the largest source of capital around (the State) is called for, and exert its property rights.
Patrice Ayme
http://patriceayme.wordpress.com/
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