Bank shares were crushed today, perhaps because nationalization is back on the table — big time. “Obama moves towards Swedish Model for Banks” is the top headline on market-moving Drudge, though it links to this article in the FT which isn’t quite so definitive. It basically recaps some comments made by Sen. Lindsay Graham and Obama hinting that nationalization would be preferable to a Japanese style recovery.
Even if nationalization isn’t what Obama wants to see — and he’s said exactly that — it would only take a couple days like today of Citi (C) and BofA (BAC) getting beat up to force the administration’s hand. Word is that the Geithner, private-public partnership will still take a few more weeks to formulate, which could end up being way too late to actually be a solution. Consider how long it’s taken the TALF to ramp up, and you’d probably be looking at something similar to that.
Even if the articles are overblowing things, the whole thing could be inevitable now that it’s taken hold like this.