While we prefer as a nation not to nationalize banks, the government would be doing it in times of crisis for security reasons and peace of mind. Just like FDIC insurance, we need the option of nationalizing banks to help us get though times that can create problems that we can't even comprehend.
While nobody likes to hear the term "bailout", it is necessary to keep credit alive and well in an economy. If one failing bank creates a domino effect that freezes the commercial paper market, so businesses could no longer pay their bills or issue pay checks, that nation, and any nation it does business with, could easily be looking down the barrel of a depression.
If done right, nationalizing a failing bank could not only save the bank, but also help the nation, as well. Most private banks are about profit and, sometimes, would rather let the bank crash and burn, so the top employees can still make a huge profit, while endangering the country. Nationalizing the bank would prevent that, keep the books clean on the bank, and give it the capacity to make loans to keep the nation well. However, it must be done fast and efficiently.
Economic instability can be catastrophic for the citizens, and if they are in desperate economic situations, they can easily fall prey to political forces and situations they wouldn't normally be interested in supporting during good economic times. If it weren't for the economic collapse in Germany post-WW1, Hitler might have had a much harder time finding support in his rise to power. Hungry, jobless, and hopeless people are more concerned with self-preservation than higher ideals about community and country. To prevent such a shift in priorities, the nation must protect the economic welfare of the country by nationalizing banks, if necessary. If private banks fail to prevent trouble, the nation is obligated and right to step in.
The institution of banking, and it's corollary of finance, is just too important to the well-being of society. Here is how I think that it should work: if an institution has become large enough that it can bring down the whole system, then it should be nationalized, and the regulators that allowed it to happen should be publicly flogged. If said institution does, in actuality, fail, the individuals who where running it should be locked up for life, if not put to the sword. In some ways, they are worse criminals than any drug dealer or petty thug can ever be. The scope of the damage that the bankers can do goes far beyond that of even the most ambitious criminal operation. There was a spate of suicides after the last bank failures, and many people took their lives, having lost everything. And the bankers responsible for the crisis should be held liable for those deaths, and treated as first degree murderers. Once the crisis has played out, the banks should then be sold back into the public sector piecemeal, so that no institution is large enough to cause the problem again.
Governments should stay out of banking to begin with. Any time you have governments sticking their noses into banking, you are asking for trouble. Maybe governments should start regulating these banks to start with. If they were regulated, then they wouldn't have to bail them out when they fail. It's ridiculous that these banks can pay their leaders billions of dollars in bonuses, while the banks are failing at the same time.
Nations are justified in doing so. The preservation of the nation's status quo is a national issue. If the country is going to fail otherwise, it is important to provide stability, not for the sakes of the banks themselves, but for the sake of the citizens who rely on the stability of the banks.
Just as a government must invest in many areas of society that hold little value to most of its citizens to ensure that it can continue to progress and develop, a government must also be able to temporarily step in to save failing sectors of its society if others sectors depend upon their survival. Failing banks, even if due to their own errors, cannot be allowed to fail if that failure would lead to the failure of a country's monetary system, and thus a complete overturn of a country's property system. If a government believes that its citizens are fairly happy with their way of life, then failing sectors, including failing banks, must be nationalized to prevent further catastrophe.
I think it is correct to nationalize failing banks during economic crisis. Government owns the responsibility of the public in every way. If a bank has failed due to an economic crisis and the people are at loss, the government should step forward and help the bank.
Nationalization will ensure that the public will not have to face as much loss as they would have otherwise faced. Also, the banks and numerous employees associated with them will also be saved from a critical situation hampering their careers.
If banks were to fold due to problems with the economy, there would be chaos. Citizens would panic and the value of the dollar would drop drastically. It is imperative that banks remain solvent even during difficult times. The government needs to ensure that banks do not fail; or there could be another Great Depression.
I am a strong believer that private enterprise does almost everything more efficiently than governmental entities. A government that nationalizes banks has to fight the temptation to run the banks themselves, and that inevitably leads to political decisions taking priority over sound fiscal management decisions.
Look, this is a very strong subject for me, after losing almost all of my retirement when the economy took a turn for the worse. If a bank fails, let them fail. If the government fails, let them fail. It is obviously a mismanagement, when it comes to money, and nobody should be required to help the other. It's just that simple.
Nations are not justified in nationalizing failing banks during economic crisis. Just like any other industry, the banking industry should be subject to the natural ebbs and flows of the economy. The government didn't bail out all these small mom & pop businesses when Walmart came to town, so why should banks be treated any differently?
Capitalism accounts for failure through the use of bankruptcy. Failing institutions should not be rescued, as they will only continue to waste more resources. They should be allowed to fail, and once they do, they will be bought up in pieces by other institutions. Former employees will find themselves in their old jobs soon enough, so unemployment should not pose a scare.
It's not the government's responsibility to insure if a bank succeeds or fails. They are private businesses who are required to follow the laws. If their business fails, it is not the government's responsibility to save them. It doesn't matter that it's a bank. There is no justification for a government to intervene in a bank because it's a financial institution. We have laws to protect their customers already in place.
While market pressures may take a little more time to stabilize the economy than simply bailing them out, it is a much more appropriate solution. How can a child learn the value of a dollar unless they are allowed to use and lose it? The same lesson applies to the economy in general, how does it develop the proper ability to respond to crisis if it is simply coddled through it? No, we need to let banks fail, so that more efficiently managed and run institutions can come and fill in the gaps, making for a strong overall system.
I oppose the practice of nationalizing banks because it is not the place of the government to control private industry. The United States for example was founded on a free market and capitalism. I do not believe any nation has the right to take over private industry and tell it what it MUST do or not do. To tax the financial industry unfairly simply because they make money. The government has no place to stipulate salaries and bonuses of bankers and Wall Street and this is leading to a destruction of our economy and way of life. No nation is justified in over running the rights of its people and the free marketplace.
I believe it just causes more problems. The highest people in the company still get paid their insane salaries and bonuses. In my view, I believe every business has a right to fail if it cannot keep itself afloat. Other companies would have a chance to take their places. Usually accounts get sold to other banks once the bank goes under, from what I understand.
A nations ability to function in a democratic fashion, relies on the multitudes of people effecting in different ways everyday. Many of the banks failed for loose restrictions, people went overboard on their expectations, and people don't necessarily know how to live frugally. It was the fault of the many, not only the few. A nation shouldn't capitalize in control, it should put more emphasis on watching how banks work.
Nations who nationalize failing or failed banks during an economic crisis are only temporarily putting off dealing with the problem. The underlying problem still exists and will have to be dealt with at a future time. Thus, wasting government funds on bank bailouts is simply throwing good money after bad.