Five Reasons Bank Nationalizations Aren't the Answer

We are hearing about it each and every day now, the primary rumor swirling around Main Street and Wall Street is that some of the nation's largest financial institutions are in such trouble that the government may nationalize them. The speculation continues to grow by the day about the possibility and the debate is currently raging whether nationalization would be a positive or negative for the market and the overall economy. I wanted to take a look at some of the biggest negatives that a nationalization of the banking system as a whole or some of the largest players in the system.

Five reasons bank nationalizations aren't the answer

1. Giving government access to bank capital is dangerous- Quite frankly most of us understand that whether they are a republican, democrat, or independent most of the politicians in Washington are most concerned about getting re-elected. Many economists and strategists believe that nationalization of banks would give far too many politicians the power to move the massive capital of the largest banking institutions in the world.

2. Why would the government know how to run a bank? I don't understand what makes anyone believe that the government could do a better job running the bank than longtime financial executives. The government clearly is not designed to be running corporations so it is confusing as to how they would be able to guide the bank back to being profitable.

3. Creates a slippery slope- Nationalization of anything creates a slippery slope. We don't want government in control of everything throughout the economy. This is an economy that is built on the principles of capitalism and private ownership as well as small businesses. The last thing we need is government running everything.

4. How would things be accounted for? If the nationalization did take place then how would the government account for the balance sheet of the banks and the earnings or losses of the banks. Taxpayers would certainly have the right to know exactly how the money was being spent.

5. Creates disadvantages for banks that have been well run- There are still banks in this country that have been managed very well and are in terrific financial shape right now. These banks would effectively be punished for having done the right things because they would then be in competition with the government.

Nationalization isn't a pretty option and these are just five of the reasons why.