David Kirkpatrick

January 23, 2009

Bank nationalization backgrounder

Courtesy of the Wall Street Journal. The topic of bank nationalization is going to be all over the place for while. If you’re wondering what it’s all about and how it might affect your day-to-day banking hit the link. Plenty of material there on loans, disadvantages and more.

A sample from the primer:

What does “bank nationalization” mean?

A nationalized bank is owned and run by the government. The shocks of the credit crisis last fall spurred lawmakers to seminationalize the banking sector; nearly 314 institutions have already signed over some of their shares and other securities to the Treasury in return for $350 billion in government TARP funds. The government could now go a step further by taking complete ownership of certain troubled banks.

Why nationalize banks?

It makes sense only if banks are in danger of failing. In Western countries, nationalization is largely used as an emergency method to prop up banks during tough times. It is typically used to lend to small and medium-sized businesses and restructure burdensome loans to consumers.

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