“First Nationalized Bank” 0
Bonddad looks at the “stress test“:
How is a big issue. The markets are already reeling from the threat of nationalization. Every time it gets brought up, the markets tank. This was cited as a primary reason for last week’s market instability. In other words, the actual process of shifting from private to public ownership is an issue.
Now enter the above plan. I would personally use the remaining TARP money to make one big bank. Then I would stress test all the money center banks at the same time and come out with a report on all of them at the same time. Force them to sell their good assets to the one good bank and let the dregs remain in the old banks. If you do this over a short time period — say 2-4 weeks — you can end this problem pretty quickly.
The main reason I like the idea of one big bank is there is only one bank to monitor.
I think that the reason that “the markets are already reeling from the threat of nationalization” is that, despite the fiction that “stockholders own the company” (and, for all practical purposes, it is a fiction), neither the companies nor the managements which have destroyed them want to pay the financial price for their misdeeds.
