Public Ownership of the Banking Industry

Hugh Hendry, Chief Investment Officer at Eclectica Asset Management, says the U.S. government will own all the financials in a year. He says in terms of profitability, there is none left for these companies. The nationalization is an alternative to dramatic losses in the private sector that will affect society on a much broader level. Society has had to intervene in the failure of the banks because the risks to society are too large. Mergers between even the two largest banks, Goldman and Citi, is being ruled out as irrelevant because, ultimately, the largest partner will be the U.S. Hendry believes the punishment is being felt by the shareholders through the stock prices of the banks because they looked the other way for more than a decade in a case of excessive moral hazard. The shareholders should get nothing as the government comes in and buys these banks at very modest prices because the tax payer will be paying for these mistakes for a very long time.

Such a huge amount of wealth is being held by the executives of these companies as the country pays for their taking on of such huge risks and subsequent ignorance of the warning signs. This money should be taken back and those much better qualified to deal with the present situation need to be brought in. There are too many stakeholders in these companies (the American people seem to be the biggest) to allow those who made these mistakes to go scott free while also keeping the money they did not earn.