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While Bernanke is in favor of a public private partnership for banks.
Our next guest says any attempt at nationalization.
Is the wrong -- ago.
A senior fellow at Decatur -- too good to see again Jerry thanks for coming in appreciate.
Happy to be -- now we had a kind of a definition of what a nationalization is from a the Fed chair himself let's play a little bit and get you to react to it.
Nationalization to my mind is when the government seizes the bank.
Zeros out the shareholders.
And begins to manage -- run the -- and we don't -- anything like that.
It may be the case that the government will have a substantial minority share.
In in city or other banks.
We have the tools.
Between supervisory oversight.
Shareholder rights and other tools.
To make sure that we get the the good results we want terms improved.
Performance without all the negative impacts going through a bankruptcy process or some kind of seizure which can be.
I think destructive to the markets are right so carried out -- -- -- that was at the beginning of his statement do you agree with his definition of what nationalization this.
Oh sure absolutely it would have been good if if they had gotten this out earlier but I think the reply excitable with school.
Blind sided but you believe that that there really is no.
Reason to nationalize a bank that we should let the banks.
That can't raise the capital cat cat passed the so called stress tests to actually outright sale of that correct so even your former.
Alma mater Citigroup should fail if it can't happen -- capital can't be helping.
I think if if there's no prognosis for their being healthy than -- than that there has to be some unwinding of them but I think what Bernanke is saying.
Is a little bit hedged.
But that they're really trying to force this on Citibank to downsize so that they do have a prospect for survival I think that's what he's saying.
Jerry -- the Swedish model you and I've talked about this before.
Everybody's saying she that we worked over the air why wouldn't it work here what you -- If you get an institution the size of Citibank -- reigning major money center bank in the hands of the government that it isn't gonna end up engaged in politicized lending.
And and also of course these institutions are much much larger than any this week.
-- OK but that the Swedish situation did not.
Cannot be applied to us because we have way more banks and obviously people keep bringing that up I think -- a bit misguided.
But looking overall at the picture.
When -- government takes an equity stake that's not a nationalization would you agree with that because that's what we're seeing right now.
It's not a full scale nationalization but it it is a step in that direction -- think it's a step in the wrong direction.
I think it may have been necessary in this instance.
And I I just hope.
That when these institutions.
Recover that the government has the way of plan to -- -- -- Jerry don't you think we have already seen.
Politics enter into the financial sector we saw.
In fact a bank in the district of Barney Frank who receive funds.
From the TARP that maybe it wasn't entitled to because it was -- Terribly run bags so badly run that they had.
A portion -- Porsche as one -- as their company car and yet they got -- funny so.
As soon as we saw politics emerge as a part of the solution to -- financial crisis we began to see political favoritism.
-- our banks now.
Yes and they'll only be more of it if the government we're -- nationalize banks and again my analogy is to Fannie Mae and Freddie Mac.
See how they've been politicized we don't want that to happen to a major money center bank but as soon as the government start supplying -- it was inevitable we were gonna have this.
I call -- corruption.
Flat out corruption can you define that what do you mean by that.
Well I mean I think that when government funds taxpayer funds.
Are used for purposes other than the intended purpose which is to help out eligible banks.
That that's the kind of corruption at the kind of political corruption it certainly favoritism.
And and do you think that because there's been so much politicization of all of what's going on here that no matter what we try and do it's going to get caught up and that's.
Snowball into something that can't possibly be helpful.
I hope not -- I think we're we're at a point where that could happen and that's why I'm kinda trying to push back that's all I can do.
Jerry indymac another example is everybody's grasping for straws here trying to figure out something that didn't work -- that was close to nationalization we.
We take we had to take over indymac.
-- of course there's there's a mixed history in terms of how we've run it.
But apparently they can't find a buyer right now right.
That's what appears to be the case though the FDIC says they have a buyer lined up and we'll have to see but they.
They've been very liberal in their loan modification terms and they may have created a situation where people don't wanna take those that simple.
Jerry -- Driscoll former vice president both the Federal Reserve Bank of Dallas and it city group as well Gerri thank you very much thanks very -- thank you.
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