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.
Showing posts with label timothy geithner. Show all posts
Showing posts with label timothy geithner. Show all posts
Monday, March 9, 2009
Friday, February 13, 2009
Geithner's Bank Plan... Or Lack Thereof?
A lot of debate on the blogosphere about the bank plan (or bank "plan") that Timothy Geithner rolled out. I'm giving the benefit of the doubt to the Administration. Mainly, it seems to me the hesitation of the Administration is belied by the debate between a "solvency crisis" and a "liquidity crisis," and how much of the banks fall into one or the other.
It's unfortunate, however, that Geithner didn't present that honestly and forthrightly, in a way that could still give some confidence to investors. Presenting both possibilities, for instance. Giving a window into their thought process. Leaving us in the cold, playing Treasury-ology, is not very productive. I have faith, as other bloggers do, that Obama and Geithner are privately contemplating nationalization in some places, recapitalization in other places (after all--banks that bust get nationalized whether we want to or not). But the strategy, the philosophy, is unclear.
It's unfortunate, however, that Geithner didn't present that honestly and forthrightly, in a way that could still give some confidence to investors. Presenting both possibilities, for instance. Giving a window into their thought process. Leaving us in the cold, playing Treasury-ology, is not very productive. I have faith, as other bloggers do, that Obama and Geithner are privately contemplating nationalization in some places, recapitalization in other places (after all--banks that bust get nationalized whether we want to or not). But the strategy, the philosophy, is unclear.
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