We need a Nationalization of our Insolvent Banks

RGE Monitor

RGE Monitor

On Nouriel Roubini’s Global EconoMonitor, Nouriel Roubini argues that it is time for ‘Plan N’, namely a nationalization of insolvent banking systems. The very cumbersome U.S. Treasury proposal to dispose of toxic assets – presented by Treasury Secretary Tim Geithner – can be best understood as a combination of removing toxic assets off the banks’ balance sheet and also providing government guarantees to those private investors that will purchase them (and/or public capital provision to fund a public-private bad bank that would purchase such assets). Markets were expecting a clearer plan, but also a plan that would bail out shareholders and creditors of insolvent banks. Unfortunately that is not politically and fiscally feasible. It is thus time to start to think and plan ahead for Plan N (“nationalization” of insolvent banks). Check out: “It Is Time to Nationalize Insolvent Banking Systems”. Also don’t miss “Roubini Calls For Bank Nationalization – Latest Roubini Interviews on Bloomberg” and the discussion with Nouriel and Nassim Taleb “Predicting the Crisis: Dr. Doom & the Black Swan

The Anglo-Saxon model of supervision and regulation of the financial system has failed. The supervisory system “relied on self-regulation that, in effect, meant no regulation; on market discipline that does not exist when there is euphoria and irrational exuberance; on internal risk management models that fail because – as a former chief executive of Citi put it – when the music is playing you gotta stand up and dance. Check out: “Roubini: Anglo-Saxon model has failed

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