Will US Nationalize Banks?

As red ink continues to flow, more experts say some nationalization is likely
By Jim O'Neill,  Newser User
Posted Jan 16, 2009 8:00 AM CST
A customer uses a Bank of America ATM in Los Angeles on Friday, Jan. 16, 2009.   (AP Photo/Damian Dovarganes)
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(Newser) – With US banks likely to need as much as $2 trillion in capital in coming months, more experts are seeing semi-nationalization as a distinct possibility, writes Reuters reporter Dan Wilchins. The government already is using its $700 billion bailout to put pressure on banks. The Obama administration is on record as saying that it will push banks seeking federal funds for more concessions, specifically limiting dividends and executive pay.

Citibank is showing signs it’s reacting to direct government pressure by selling off businesses after receiving a total of $45 billion in rescue funds. Over time, the government could exert more day-to-day control. But any real takeover would come at a hefty price—nationalizing a single institution the size of Bank of America or Citigroup would double the Federal Reserve's balance sheet instantly.