In the wake of Tim Geithner’s speech this morning, laying out the Treasury’s plan, such as it is, for Bailout 3.0, most smart observers have concluded that the Obama administration has at least left the door open for a possible nationalization of failed banks at some point, if it decides circumstances warrant that step.
But in an interview with ABC News’ Nighline, set to air tonight, the president seemed to all but rule out that idea. He told ABC:
[Sweden”] took over the banks, nationalized them, got rid of the bad assets, resold the banks and a couple years later, they were going again. So you’d think looking at it, Sweden looks like a good model. Here’s the problem — Sweden had like five banks,” he said, laughing. “We’ve got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the, the problems in terms of managing and overseeing anything of that scale, I think, would — our assessment was that it wouldn’t make sense. And we also have different traditions in this country.
True, Obama, like Geithner, has always seemed skeptical of nationalization. But his answer to ABC would appear to go further than he yet has in declaring that he’ll avoid adopting any version of that approach.
Of course, things might look different once we get done with these “stress tests,” and find out how many major banks are truly insolvent. But as of now, the president seems dead set against even short term nationalization.