Bank Nationalization

[VPH]

What if the US had somehow nationalized major banks during the recession? What would have likely happened?

[Snowstalker Mk. II]

A military coup.

[ag]

What if the US had somehow nationalized major banks during the recession? What would have likely happened?

The recession would become deeper and longer. The government would assume the banks' obligations (sharp expansion of public debt) and sell the banks eventually clean and pretty to government-favored insiders. The taxpayers would wind up paying for that. Has been tried many times in other countries, and that is the usual result.

[King]

No country bumpkin would trust giving their money to a public bank. The number of militias would double. Obama probably would have lost re-election.

Oh and we would've all been gouged by immobile interest rates from an ineffectual Congress like student loans are.

[AggregateDemand]

Examine the mandates and requirement Congress places on banks. The recession would have been over in 5 minutes, but the economy would be overheated so badly that a New Great Depression would have struck sometime between 2008 and now.

[Boston Bread]

How did it go for North Dakota?

http://en.wikipedia.org/wiki/Bank_of_North_Dakota

It was a long time ago but it seems like conservatives are fine with it today. Of course if Obama did so it would be another story.

[ag]

How did it go for North Dakota?

http://en.wikipedia.org/wiki/Bank_of_North_Dakota

It was a long time ago but it seems like conservatives are fine with it today. Of course if Obama did so it would be another story.

The problem is not having an occasional state-owned bank. It makes very little difference in the life of North Dakota - and no difference elsewhere. As a relict of old debates it is, actually, quite cute.

[ag]

No country bumpkin would trust giving their money to a public bank. The number of militias would double. Obama probably would have lost re-election.

Those, probably, would not be among the 100 most significant consequences of it, but, ok.

[ag]

Examine the mandates and requirement Congress places on banks. The recession would have been over in 5 minutes

You are not even right on that. The recession would take a lot longer to get out of.

[Ebsy]

The fraud in the Bank of Missouri is famous among St. Louis Historians.

[AggregateDemand]

You are not even right on that. The recession would take a lot longer to get out of.

The US government believes in loose lending, which the private sector fought bitterly until they realized that origination fees and other upfront costs were more lucrative than interest and debt-sales in the secondary market.

Anyone with a pulse would have gotten a loan, and 5 years later it would have imploded even more spectacularly.

[Southern Senator North Carolina Yankee]

The results would be a disaster.


Having a public bank competing with other traditional banking institutions is nothing like having gov't take over all the investment banks.

[AdamHyde]

that would not have gone well. In the UK, our post-war consensus stopped short of bank nationalisation, but we had similar effects. Workers voted for the party promising the greatest wage rise- peaking at 25% in 1975. Because it was political, the government had to ensure that workers had incredibly favourable conditions, and so everything became inefficient- to the extent that British made became a joke across Europe.

Political influence with banks would be even worse. The UK briefly nationalised / bought controlling stakes in most of our banks in the aftermath of the 2008 crisis. Despite the fact that the businesses were operated separately, and the banks were always going to be sold off relatively quickly, the UK  government set lending and rates targets for the banks. This meant that the banks had to, at least to some extent, ignore free market forces. As so, lending to industry dried up completely and mortgage lending became more irresponsible.