This port was written by Minyanville contributor Minyan Peter.
In many respects we have seen this scenario already play out here in the US with Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE) and AIG (NYSE: AIG) where the government has purchased through various securities a controlling interest in these entities. And in the UK, the British government now "owns" (and today consolidated) both Royal Bank of Scotland (NYSE: RBS) and Lloyds (NYSE: LYG).
What happens with nationalized entities is tough to generalize, although as quick look at AIG's press releases since the US Government came in would suggest that divestitures of valuable non-US businesses is clearly a priority. Also, and not intending to condemn Citigroup (NYSE: C) to the list, but I also think that we are likely to see some form of the Citibank/Citiholdings structure will be adopted for nationalized banks where good operating businesses are separated from bad assets and discrete businesses to be sold (such as Smith Barney).
At the end of the day, though, what happens depends largely on the number of institutions nationalized both here in the US and abroad. While governments are not eager to be operators of undercapitalized institutions, they also do not want to be saturating the market with a global garage sale of business units. At the same time, though, there is enormous local political pressure to retrench (link in my prior piece on this) so, again foreign unit sales are likely to take greatest priority.
In any case, though, I would expect that should nationalization expand, we should expect to live with it for a period of years, not months or weeks.
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Reader Comments (Page 1 of 1)
2-19-2009 @ 3:18PM
Kevin said...
Why are we trying to nationalize banks? Why don't we socialize the heavy costs to Americans? IE insurance and Healthcare. If we can reduce this cost to Americans they will have far more disposable income than if we were to increase credit markets. This would decrease the costs of the average american by over 120 dollars a month or 400-500 a month for a family of 4. For once in the last 10 years Americans would have the disposable income to pay off credit cards and banks. Not only that, business costs for small and large companies would see a huge reduction in employee costs.
Healthcare costs affect the entire nation as a whole and are likely responsible for over 1/4 of the bankruptcies in the US. I've known at least a dozen people who filed for bankruptcy due to a health injury and they had healthcare at the time.
It's getting to the point that if you injure yourself on vacation you'll be out a minimum of 4k to some healthcare provider ontop of your recovery time.
2-19-2009 @ 11:11PM
Allen said...
Companies such as AIG and Citigroup are reaping the results of their misguided practices of promoting incompetents (e.g. Martin Sullivan formerly of AIG, who was unqualified for ANY position other than perhaps mailroom boy - which is where he started) and believing their own propaganda. The idea of dumping OUR tax dollars into that cesspool is an abomination. Let them fail!