Monday, March 9, 2009

Nationalization Holiday?

An idea floated across my mind today. I've been reading a lot about how one of the barriers to nationalization may be an investor run on all the banks--shareholders know that they're going to be wiped out, so they will dump stock in their bank, assuming that their bank is next.

But what if the SEC closed trading during the nationalization period? Obama announces on Monday, "Today we're going to begin a process of restructuring the financial industry, and in the interest of stability, there will be a five-day stock market holiday. Only the Federal Government would be empowered to act, they nationalize the ones they want to nationalize and assure the public that any banks un-nationalized by the end of the holiday will remain un-nationalized.

I wonder how that would play out, though. I really am not sure how investors would respond at the end of the week. I personally think they'd wind up with more confidence at the end of the week, because they'd have more of an assurance that their bank is actually solvent. But I don't know.

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