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Unformatted text preview: Nationalization of the Banks Pro: The Surest Way to Recover by Thomas S. Mondschean, DePaul University When a bank fails, the FDIC has three options: closure and liquidation, merger with a healthy bank, or nationalization. Most failures are resolved using the merger option, but for very large banks, nationalization for a temporary period may be the best choice for taxpayers. In 1984, Continental Illinois Bank, then the seventh-largest bank in the U.S., failed. The FDIC decided to nationalize it. It wiped out existing shareholders, infused capital, took over bad assets, replaced senior management, and owned the bank for about a decade. The management ran the bank like a commercial enterprise, not a government agency. In 1994, it was sold to a bank that is now part of Bank of America ( BAC ). Nationalization does not mean socialization. It means the government will manage the bank as a commercial entity, with the intention of selling it back into the private sector. This approach means that the commercial entity, with the intention of selling it back into the private sector....
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This note was uploaded on 05/18/2011 for the course ECON 101 taught by Professor Mcdounough during the Spring '11 term at DeVry Westminster.
- Spring '11