Some banks may have to be nationalized, Sen. Dodd says
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Wall Street already is convinced that some significant chunk of the nation’s banking industry will be nationalized. Sen. Chris Dodd just bolstered that view this morning.
From Bloomberg News:
Senate Banking Committee Chairman Christopher Dodd said it may be necessary to nationalize some banks for a short time, as Citigroup Inc. and Bank of America Corp. tumbled today on concern the U.S. may take over both banks. ‘I don’t welcome that at all, but I could see how it’s possible it may happen,’ Dodd said in an interview on Bloomberg TV’s ‘Political Capital with Al Hunt’ to be broadcast later today. ‘I’m concerned that we may end up having to do that, at least for a short time.’
Nationalize, then de-nationalize? That sounds like a wipeout for current bank shareholders.
The BKX index of 24 major bank stocks was down 9%, bringing its year-to-date loss to 55%. The broader stock market is crumbling with the financials; the Dow industrials were down 184 points, or 2.5%, to 7,281, a new six-year low.
BofA CEO Ken Lewis insisted on Feb. 6 that nationalization of the bank was ‘not even a remote possibility.’ But Lewis obviously has lost nearly all credibility with the market.
More from Bloomberg:
Treasury Secretary Timothy Geithner’s refusal to clarify his intentions regarding either bank ‘is allowing for the absolute decimation of the values of Bank of America and Citigroup on a daily basis,’ said William Smith of Smith Asset Management in New York. ‘All he has to do is come out and say there is no nationalization.’ Regarding bank nationalization, ‘I don’t think that’s an option that’s on the table at all,’ Edward Yingling, president of the American Bankers Assn., said on the CNBC network today. Yingling met with Geithner recently and said the Treasury chief wouldn’t directly comment on nationalization. But ‘he’s been clear that he thinks that nationalization is a bad idea,’ Yingling told CNBC. ‘I see no signs that they’re interested in nationalization.’
-- Tom Petruno