tag:blogger.com,1999:blog-4900303239154048192.post2167759647041145467..comments2024-03-06T06:34:42.881-05:00Comments on EconoSpeak: Another Step Toward Bank Nationalization (Without the “N” Word)Unknownnoreply@blogger.comBlogger2125tag:blogger.com,1999:blog-4900303239154048192.post-39058905397798784112009-04-20T18:21:00.000-04:002009-04-20T18:21:00.000-04:00This position is not very far from mine. If one h...This position is not very far from mine. If one hives off the good portions of the existing banks and capitalizes them to a level sufficient to meet the financial needs of the economy, these rump institutions will be near-new. Whether the deposit base moves or not is not very consequential, IMO; this could happen quickly. There is an advantage to working with existing personnel, but if the handwriting is on the wall for existing banks, finding qualified personnel (whole departments even) for a new-new facility would not be very time-consuming. Continuity between old and new could be either an advantage or a disadvantage -- that's a longer discussion. I do not think, however, that it is wise for the government to assume ownership of the bad bank. Unless there were really massive writedowns for the bondholders and counterparties, the cost would be excessive, and I am not optimistic that such writedowns would be imposed. (a) This is the problem we have been having all along with the Fed/Treasury stance. (b) How much leverage would the government have to impose them, particularly if the parties in question are not US-based? What is the threat point?Peter Dormanhttps://www.blogger.com/profile/00093399591393648071noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-59324680634091308122009-04-20T17:04:00.000-04:002009-04-20T17:04:00.000-04:00The problem with forming public "good" banks from ...The problem with forming public "good" banks from scratch is that it requires quite some time and effort to establish a business organization and acquire a depository base. Putting the banks into public receivership, converting the bonds into equity, splitting the banks into good banks, with the depository base and remaining sound assets, owned by former bondholders and public capitalization shares, while the bad bank retains the toxic assets in a depositless holding facility, owned by the former bondholders in first loss position and the government fisc to mop up any remaining losses, would work much more quickly. And since the former bondholders would lose much of their equity, the public fisc would end up owning most of the bank equity anyway, and banks could be re-regulated and broken up under public ownership, before being sold to private interests after the economy recovers, further lowering costs to the fisc.john c. halaszhttps://www.blogger.com/profile/06674692969448923049noreply@blogger.com