The U.S. government should temporarily nationalize America's "zombie" banks, urges economist Nouriel Roubini, often called "Dr. Doom" because of his consistently pessimistic predictions.
In a recent interview in The Wall Street Journal, Roubini described his temporary bank nationalization plan.
"You take banks over, you clean them up, and you sell them in rapid order to the private sector — it's clear that it's temporary.
"No one's in favor of a permanent government takeover of the financial system."
Not too long ago, nationalizing U.S. banks was unpalatable idea among economists. Now, however, it seems a more reasonable notion. Recently speaking in favor of such a move are, among others, conservative Republican Sen. Lindsey Graham and former Fed chairman Alan Greenspan.
With people like that talking approvingly of nationalization, Obama now has political cover to act, says Roubini. He predicts the administration will formally move to nationalize within six months.
Inside that six months, according to Roubini, "Most of the major banks — almost all of them —are going to look insolvent.
"In which case you take them over all at once, you cause less damage than ... if you took over a couple now, and created so much confusion and panic and nervousness."
The White House, meanwhile, according to published reports, recently tried to squelch nervous speculation that the government was preparing to nationalize U.S. banks. Nevertheless, Citigroup is reportedly in talks could lead to taxpayers owning as much as 40 percent of its common stock.
The Obama administration, "continues to strongly believe that a privately held banking system is the correct way to go," said White House spokesman Robert Gibbs.
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