When a bank is nationalized, it will be subject to greater government supervision, which does not necessarily mean that the bank will be run by the state, but will tend to play a strong role in oversight. In such cases of a crisis, like that of the recent recession, nationalization can be a positive way to restructure a failing bank. The role of government, will reverse many of the bad policies of the prior owners, to make it successful. Bad banks can be restructured through nationalization during economic crisis, which is probably preferable to a bank going bankrupt.
I believe that nationalization of banks would be in the country's best interest, as the profits that the private banks are skimming would be realized by the government, instead. This would result in less fees, the backing of the U.S. Treasury, and picking up the slack for those that are underachieving. In a time of crisis, stability is the most important goal.
I think that nationalization of banks can be a good idea to help failing banks. The nationalization of certain car companies, such as GM and Chrysler, was successful. These car companies received specific restructuring instructions and are now in the process of buying back the stock from the government. It took less than four yeas for this to happen. I think the same could be true of banks as well.
Nationalization of banks during economic hardships can help 'bad' banks by creating a larger pool of funds which can help the struggling banks, or close the ones that cannot be helped. With nationalization, there is no way to 'sweep' bad decisions under the rug, which will help keep banks on the up and up.
Part of the reason we end up with a poor economy is mismanagement of the banks. When they get in trouble, it takes funds to "bail them out." Federal government can provide the money to do this. By doing so, rules can be made that will not allow the banks to function again in the way that they did to get themselves in a bind in the first place. The banks need regulation in order to not be corrupt.
Government control and regulation of the banking industry is probably the only solution to the current banking crisis plaguing our country during the bad economy. One reason for this is that it creates an air of consumer confidence that, with government support, even bad banks can't fail, which makes them more attractive to the consumer.
In order to have a healthy economy, the system has to be cleansed in a systematic manner. Re-organization has to simultaneously address two aspects. One is restructuring. At the same time, it be trustworthy for the ongoing transactions. Nationalization could be a better option, wherein the government support can build the trust among customers.
If the government nationalized banks and had set standards about who banks could loan to, apply mortgages to, etc. there would not have been so much instability and dissolution of so many American banks. I think some people would have a problem with this because it takes some of the freedom away from independent banks, but I think it is more unfair for the people who were stuck with a bank that no longer exists, because they were unaware what their own banks were doing with money.
The nationalization of banks is necessary because of the important role that banks play in our economy. The whole point of the FDIC is to come in take over the bank and prevent failure by forced restructuring. They take banks over all the time and the bottom line is that they are experts at preventing banks from failing.
So many countries are struggling to support their own budgets right now, and all of the red tape and bureaucratic excess would only harm "bad banks". If a bank is failing, then I do believe in federally insured programs to secure citizens' funds. But, I do not think the bank itself should receive government aid, and nor should any government have a national bank.
Although nationalization of banks has been used temporarily in times of economic crisis by several different countries, I don't think this measure would be effective in the United States. Due to the sheer number of banks in this country, the government would not be able to take them all over. As a result, the government would be forced to "play favorites" and support larger institutions, while smaller banks would continue to present a risk.
All you have to do is look at the issues with the government and know that having banks become nationalized would not help the situation out. The government has issues passing its own budget and being fiscally responsible. Over these past few years we have gone so far into debt that there is no end in sight. The government would run into the same problems if they owned the banks.
Globally there are numerous examples of banks that have been nationalized and they are fraught with problems. There are no perfect solutions, but overdoing it by trying to get "big brother" involved when banks needs to find their own solutions defeats the purpose.
Banks were picked to be too big to fail based on the size of their political contributions, not their impact to the economy or whether they could restructure and survive. The bailouts were given on the basis of family relationships, special loan deals to senators, and campaign contributions, not which companies needed temporary cash infusions while they balanced the books. Nationalization only makes the losses public without preventing future failures of politically based loans. Much of the national crisis was started when governments said to give home loans to everyone, regardless of ability to repay, such as to illegal immigrants and those who had no way to verify their income. Nationalization of banks simply takes the stockholder and bank deposits and turns it into a new source of slush funds and funding of political favors for an already corrupt government. The banks that were failing should have been allowed to fail, and the depositors refunded their money via the FDIC. It would have been cheaper than multiple bailouts and helped the stronger banks get stronger as customers flocked to those still open.
The Constitution of the United States clearly states that national banks are illegal. If a bank has gone bad and is no longer performing at a profit, according to free market principles, the bank should go out of business. It is financially unhealthy for a nation to buy out and run a business that doesn't operate at a profit or operates using questionable tactics.
Nationalization of banks simply means a government takeover or government ownership of banks. Government should stay out of private business, and allow banks to succeed or fail on their own efforts, like any other business. This is one of the core principles of the free market system that our economy is based on.
Having the government take over industries is never successful. The government run companies are never as efficient as privately run companies. The government always wants to interfere with decision making to help protect the voters in their own districts instead of making the company more efficient and profitable. It would start a long term decline of that industry.