Explicit nationalization of financial companies has little support among key Obama officials, sources said. Treasury Secretary Timothy F. Geithner and top White House economic adviser Lawrence Summers think governments make poor bank managers and cannot efficiently manage a vast number of institutions, according to some of their associates.Because, as Atrios notes, "Has it occurred to no one that bank managers also make poor bank managers?"
Another danger is that by taking over a substantial portion of a bank's stock and wiping out the investment of the firm's other shareholders, the government could also precipitate a sell-off across the banking system as investors flee, fearing they could be next.No, investors will flee because they believe the banks to be insolvent, because the US government won't seize solvent banks. Even the Swedes didn't do that during their banking meltdown in the 1990s.
The real problem is that the regulators, Geithner, Rubin, and their mentor Robert "Soon to be Indicted" Rubin, have gone native.