A TPM Reader comments ...
In an interview with Bloomberg set to air later today, Chris Dodd was reportedly asked about nationalization. The powerful Senate Banking Chair did something unexpected - he spoke the blunt truth:
"I don't welcome that at all," he said, "but I could see how it's possible it may happen. I'm concerned that we may end up having to do that, at least for a short time."
There's an interesting dynamic at work here. Nationalization is a self-fulfilling prophecy. Investors, convinced that it's coming, are dumping bank stocks. Uncertainty is making it difficult for the most troubled banks to finance their operations. Their stock prices are
routinely setting new lows - Citi and Bank of America both lost about a fifth of their remaining value on Dodd's comments. That's why Ken Lewis is pushing back. Unless something dramatic is done to convince investors that nationalization is not in the offing, it becomes the only solution. But, as Lewis has discovered, no public figure is going to step forward and take it off the table at this pivotal juncture.
Now that Dodd has publicly mooted the notion, it's probably picked up too much momentum to be stopped. What was politically unfeasible just months ago is now inevitable. By the time the government steps in, it's as likely to be met with as much relief as opposition.