February 24th, 2009
11:29 AM ET

Bank nationalization isn't the answer

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William M. Isaac
The Wall Street Journal

People who should know better have been speculating publicly that the government might need to nationalize our largest banks. This irresponsible chatter is causing tremendous turmoil in financial markets. The Obama administration needs to make clear immediately that nationalization - government seizing control of ownership and operations of a company - is not a viable option.

Unlike the talking heads, I have actually nationalized a large bank. When I headed the Federal Deposit Insurance Corporation (FDIC) during the banking crisis of the 1980s, the FDIC recapitalized and took control of Continental Illinois Bank, which was then the country's seventh largest bank.

The FDIC purchased Continental's problem loans at a big discount and hired the bank to manage and collect the loans under an incentive arrangement. We received 80% ownership of the company, which increased to 100% based on the losses suffered by the FDIC on the bad loans.


Filed under: Economy • Raw Politics • U.S. Federal Reserve
soundoff (9 Responses)
  1. Neo

    The gov't knows that nationalization is a bad and unecessary investment. I had asked if we needed the banks that would be nationalized. I'm going to assume we don't. Good!

    February 24, 2009 at 5:33 pm |
  2. kim scott

    what I'd like about what the PRESIDENT said about
    accountability and transparentcy is when he spoke
    to the mayors and governers about calling them out
    if they are not doing their jobs in appropriately or legally
    becaue what they do reflect us as a city,state,or nation
    from now on and it is their duty to respect and uphold
    the law.as the PRESIDENT said this is time for change.

    February 24, 2009 at 4:25 pm |
  3. sheasu

    In my opinion, the banks can't handle theirselves because their going bankrupt. The government isn't taking full responsibility for monitoring the banks. We can't depend on the banks or government to take care of our financial situations; we have to take care of it by ourselves. Even though we all need to unite as one, it's hard to do so when the economy is extremely bad that we don't know where all the hard-earn money went. Although citizens of the U.S is suppose to trust and believe in both our government and banks, it's hard to when they taking jobs away; leaving it nearly impossible for the average citizen to pay bills.

    February 24, 2009 at 2:55 pm |
  4. Michael "C" Lorton, Virginia

    The CEOs of the banks can't manage the banks--the government has no transparency or accountability of the money that they are giving to the banks to resolve their financial crisis-–so what do we have here--the fox (banks) ate all the chickens in the hen house-the government provided more funding to the foxes to purchase more chickens--and they did at KFC--now the government want to nationalize and take ownership of the banks-–it is the same chickens--but different foxes-–I wish I had the answer.

    February 24, 2009 at 1:21 pm |
  5. Ray

    Why cant bank offer higher returns on banking instruments, so investors would particpate. Here is an example 10 yr CD returns of 7-8%. Instead of the gov't / tax payors giving or loaning banks these money. Why not encourage private investors?

    February 24, 2009 at 1:18 pm |
  6. GM Ferraro

    The economy is suffering and credit card holders have the burden of over extended their credit to pay bills.

    The credit card companies have a helpful suggestion when one looses employment. They have a Account Protection Plan that pays an amount on each $100 on the card for 24 months. Thus, helping the credit card holder to sustain themselves while they find new employment without worrying about their credit and rating.

    This needs to be advertised to the public more to give a sense of relief to the people who are struggling to make ends meet. Consumers need to know that this option exists and that credit card companies can be helpful.

    I believe the news media also has an obligation to help promote this news.

    Thank you for listening.
    GM Ferraro

    February 24, 2009 at 12:57 pm |
  7. Bruce Hoff

    Okay lets take a step back and look at the big picture.
    Can we trust bankers to act in our best interest ? NO!
    Can we trust Wall Street to act in our best interest? NO!
    Can we trust the reporters that were supposed to be keeping us aware of what was happening to our economy? NO!
    Should we listen to an opinion from one of those reporters? NO!
    Keep doing the same thing and expect to get different results is the actions of a fool!
    We need oversite that keeps the best interest of the public as the foremost importance!
    Your rambling means little to those who have lost everything due to money grubbing bankers, Wall Street fat cats and reporters asleep at the wheel.

    February 24, 2009 at 12:39 pm |
  8. Alyzabeth

    From his lips to our politicians ears!

    February 24, 2009 at 12:06 pm |
  9. adam wardel

    I agree whole heartily. Someone in the administration needs to settle the hearts of this nation's citizens - especially those who help control its finances - by beginning to say something that makes sense. All I hear are enormous budgets for useless projects disguised as a bailout, and that every time the new administration speaks about the economy, the market drops even more. This is not the right way to sell an agenda. I am smart enough to know these things take time, and I know we are in a serious situation, but lets try talking about something that actually will boost the economy for once, like... solidifying foreign trade, and stabilizing the housing market.

    February 24, 2009 at 12:02 pm |