One of the ideas being floated by the Obama Administration is the idea of a stress test for struggling banking institutions. Banks that appear very close to insolvency would then be candidates for some sort of bank nationalization. Here is what MarketWatch reports about the stress test — and its possible outcomes:
"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, I expect bank regulators to nationalize by taking
over common stock and putting in a board of trustees made up of bank
managers," said Columbia Law School Professor John Coffee.
the government may take convertible preferred shares or if a bank is
clearly insolvent, I expect bank regulators to nationalize by taking
over common stock and putting in a board of trustees made up of bank
managers," said Columbia Law School Professor John Coffee.
It is an interesting possibility, and one that has plenty of people concerned about what happens when the government takes over a private institution. Others, though, figure that we've already nationalized the risks associated with failing banks, so the government might as well potentially profit.
Do you think bank nationalization is a good idea?
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