There is so much confusion regarding what bank nationalization really is. Bank nationalization in the truest sense is a forcing of the bondholders, the senior bank corporate bondholders, to take a haircut, or a partial compensation on their investment.
The Democrat and Bush Admin and right wing Republican view of nationalization is to take a stake in shares, either preferred or common stock, with some control over the decision making of the banks. The Dems and Repubs argue about this action over and over without really advocating a real nationalization.
But according to Bill Seidman, that is not true nationalization. In the S&L crisis in the early 90's, Seidman and the Resolution Trust Corporation took over bad Savings and Loans, cleaned them up, and resold them to the private sector. That was a temporary takeover, and the bondholders took the hit.
The issues now are:
1. The hedge funds are highly leveraged with these bonds and will lose millions if the bondholders take a haircut.
2. Some of the biggest and wealthiest families who have power in the world economic system through hedge fund investments have the power to discourage governments from using the Seidman plan against the banks classified as too big to fail, like Citibank, Bank of America, JP Morgan, Wells Fargo and others.
3. Fascism is where the banks are in control, where the government does not truly nationalize, where the treasury is raided by these financial institutions that offered the toxic loans that hurt the economy.
4. Communism is a permanent taking over of the banks by government. We are closer to fascism right now than we are to communism. Remember, a temporary takeover, like the Resolution Trust accomplished was temporary, not permanent, and therefore cannot be considered communism.
I hope that I have clarified the issues. I support President Obama on issues of foreign policy like not provoking Russia. I oppose the empire building neocons. But I also believe that as Seidman and Roubini believe, the banks should be truly nationalized. Roubini and the IMF are expecting huge losses from the banks on Tier 2 and Tier 3 assets, regardless of stress tests approving Tier One capitalization requirements.
I disagree with the Obama policy here. But I also believe that the most dangerous folks are the neocons. I hope these people are either diminished in the Republican party as Pat Buchanan hopes for or if running through Palin or Jeb Bush or another candidate, would be defeated for years to come.