Wanted: bank shareholders
So, economists around the world are oushing for nationalisation. It is the quick and agressive solution for the current financial crisis, they argue. Banks took too much risk, and now that things run out of hand, the government has to put a floor under the system, effectively wiping out all shareholders equity. It puts the financial burden of the crisis on the shoulders of the shareholders as if they are the only culprits, and leaves any future upside for the government/public.
OK; but these bank shareholders were not always the greedy guys they are now commonly depicted. They also trusted the regulator, prudential control, central banks, etc. to monitor the macro stability and the safety of the financial sector. And guess what, these institutions are run by the government or their nominated people.
If banks are completely nationalised, it will be difficult to reverse this process in the future. Shareholders feel they are punished severely for a systemic failure that was at least a shared responsibility.
Governments say they will nationalise the sector temporarily, to bring the banks back to the public later. But quite frankly: who will want to become shareholder of a bank in the near future ?
As said in aprevious post, there is a solution in between: partially nationalising and giving more time. That is the Surowiecki-way, and it is worth to take a look at it.