Bank Nationalization Proposals Are Back

Henry Blodget has an intelligent article arguing that Bank of America may soon be in need of another bailout, and proposing a Swedish-style nationalization as an alternative. He lays it all out and it’s pretty compelling.

That said, I’m not sure that any of the underlying problems with the early 2009 version of this idea have actually been resolved. Blodget proclaims himself “angry” at Treasury Secretary Tim Geithner. His proposal, however, is for Geithner to “set a ‘trigger price’ for Bank of America stock” that is kept secret from the public and from Bank of America. Then if the price if breached, Treasury will nationalize the bank and do various things. Nowhere does Blodget note that this would be illegal. My read of the views inside the Treasury Building is that they think illegal seizures of private property would have undesirable impacts.

Consider it your daily reminder that in the American system of government, things generally require coordinated action between the executive branch and Congress to happen. What do you think the prospects are for timely congressional action on a new bank nationalization program? Not good. So we’ll muddle through.