Federal Chairman Ben Bernanke says the recently debated idea of nationalizing troubled U.S. banks — if necessary — would be short-lived.
“As a general rule, it’s very challenging for governments to manage banks for a protracted period,” Bernanke said Wednedsay at the National Press Club.
“There is the additional problem if you have a government-run institution, you tend to lose their franchise value, and counterparties don’t like to deal with you because they don’t know your future.
“Whatever action would need to be taken at one point or another, there’s a very strong commitment on the part of the administration to keep banks private and return them to private hands as quickly as possible.”
Former Fed Chairman and longtime free-market icon Alan Greenspan said earlier this week that nationalization of U.S. banks might be the “least bad” way forward in the ongoing financial system collapse.
In making the comment, Greenspan joined Republican Senator Lindsay Graham (R-SC), a member of the Senate Banking Committee, in testing the waters for support of the idea of letting government simply take over failing banks. Germany also this week cleared the way for bank nationalization as a last resort.
“It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring,” Greenspan told the Financial Times in an interview.
“I understand that once in a hundred years this is what you do.”
Greenspan made the comments before speaking to the Economic Club of New York.
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