February 23, 2009
The Obama administration is considering a plan to temporarily nationalise US banks in a historic departure for the world’s champion of free markets, prompting fears of further steep falls in US and world share markets.
Despite tepid denials from the White House, there has been a steady drumbeat of signals over the past few days indicating the bank plan is under consideration, including comments from Federal Reserve chief Ben Bernanke, who acknowledged that government takeover was a possibility.
“Whatever actions need to be taken,” Mr Bernanke told journalists when asked last week about nationalisation. “I think there’s a very strong commitment on the part of the administration to try to keep banks private, or return them to private hands as quickly as possible.”
While some top administration officials are said to be against any sort of nationalisation, Chris Dodd, head of the powerful banking committee of the US Senate, said on Friday he was “concerned we may end up having to do that, at least for a short time”.
Unthinkable just months ago but becoming more likely as the US Government and Federal Reserve commit trillions of dollars to try to underwrite a financial system many say is bankrupt, a government takeover of the US banks would wipe out shareholder funds.
Bank shares started to plummet in the US on Friday (Saturday AEDT) and rebounded only after the White House was forced to reiterate its support for the private banking system.
White House spokesman Robert Gibbs told a press briefing the Obama administration “continues to strongly believe a privately held banking system is the correct way to go” but he declined to rule out nationalisation.
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