Nationalization of America's Banks
In Alan Blinder's article in the New York Times entitled, "Nationalize? Hey, Not So Fast", he argues that some of America’s banks are in pretty bad condition, but that nationalizing these banks might not be a good idea. He also acknowledges that some of these banks are "too big to fail". There may be many possible solutions to this problem, but nationalization should not be one of them. Many who are in favor of nationalization site Sweden as benchmark for the United States. It is true that Sweden was able to successfully nationalize its banks, but it does not guarantee that it will work in America. Sweden's government only had to deal with an extremely small fraction of the banks that the U.S. government would have to regulate, which is more than 8,300. It would also be difficult for the government to nationalize only a small number of banks and allow the rest to be handled in the private sector. Banks that are not nationalized would face a disadvantage in competing for funds with the government-backed banks, forcing these banks to pay higher interest rates to attract customers and their subsequent deposits, resulting in lower profits. Another problem that Sweden didn't have to face was the size and complexity of banks. Many banks in the U.S. hold billions of dollars in assets, causing more complications in managing these assets. If the government were to take control of the financial sector, banks would mirror the efficiency of the U.S. Postal Service, which anyone can tell you is a complete fiasco!! Finally, the confidence of the American people would plummet to all-time lows if banks were nationalized. It isn't American tradition to seek governmental help unless in dire straits, and nationalization would indicate that the financial sector is failing, resulting in less consumer confidence. Less consumer confidence would only deepen the recession and cause the stock market to continue its downward spiral. The government cannot be allowed to tinker with the free market. Every time it implements a new policy, such as the nationalization of banks, past history has shown that, although good intended, these policies make society worse off.