Whalen: Nationalization Of Citi and BOFA “Inevitable”

From TechTicker: In the past few months, an increasing number of economists have become convinced that the best “fix” for the banking system is a government takeover and restructuring of companies like Citigroup. And some voices in the government are finally supporting this idea.

Over the weekend, Senator Lindsey Graham said he thought “nationalization” has to be considered, because he doesn’t want to throw good money after bad.

What would this mean, exactly? The government running our banks for the next decade?

No, says Chris Whalen of Institutional Risk Analytics. “Nationalization” is a poor word to describe the process. “Receivership and restructuring,” along the lines of what the FDIC did with WaMu, is the right way to think about it.

The biggest concern of those opposed to the RECEIVERSHIP route is that the debt markets will seize up again as debtholders realise that their capital is at risk. Chris Whalen thinks this fear is overblown.