Categories
Economy Investing

Bank nationalization: II

Reading Time: 2 minutes

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.