Bank nationalization: II

This is the second part of my thoughts on bank nationalization, I hope President Obama and his finance team can read my blog, as they are thinking through the “bank rescue”, the No. 1 issue facing this country, and the world economy for that matter.

As I said in my previous post, bank nationalization appears bad for the existing shareholders of bank common stocks, in the sense they will get wiped out or diluted. But I also said this is merely “mark to market” for them, whether they want to face it or not, the day of reckoning will come soon or later. In the mean time, when we are waiting for the eventual take over of some of the nation’s largest banks, consumers and business get scared, they either withdraw money and put under their mattress (consumers), or stopped investing and started hiring freeze/travel freeze/lay off (business). This will have spill over effect on the world, as we are living in a increasingly globalized economy. When the rumor of China new stimulus started, the US stock market started to rally. You got the idea.

I can understand the Americans are not warm to the idea of nationalization of nation’s largest banks. But the president can not lead by polls or the noises in stock market. He should take a deep breath, look at the problem, make a hard decision, and SELL the “bank nationalization” to the American people. There are other important issues, healthcare, energy, jobs, etc. It’s good show he flew to Ohio to give a speech with 25 new police recruits, showing the fruits of stimulus package. These are important things, e.g. an affordable healthcare system is vital to the US business and nation’s economy. But apparently all these can not be the No. 1 priority: the banks. Without a healthy banking system, the modern commerce just won’t run. I also understand he need more experienced staff to run the finance, and the big banks. Maybe he can ask some help from China. I mean, Chinese has the most experience running nationalized banks, and it looks to me (actually according to International Accounting Standard) those banks are pretty healthy. So why not being a student once a while? Why American should always be the teacher 🙂

Note: it’s also in China’s interest for US have a healthy banking system, a healthy credit, and confident consumers. I am sure if President Obama asks, Chinese will help. I know I will.

PS, my friend Bo Peng wrote some thoughtful articles regarding the “how to deal with toxic assets/accounting standards” (Whatcha Gonna Do When 1+1 No Longer Equals 2), and “bank nationalization” (Re-privatization, Not Nationalization).

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