All week long we’ve been asking why Citi and JP Morgan moved their earnings announcements up by a week. Our strong suspicion was that executives at both banks had been tipped off by government officials that some kind of new intervention into the markets was coming. But what intervention?
The hottest rumour of the day is that the government is preparing to nationalize both Citi and Bank of America. The idea is that the government could put Citi and Bank of America into a conservatorship, much like it did for AIG. The idea has been floating around since at least last October but today many people think nationalization could be imminent.
Sheila Bair, who runs the FDIC and would play a key role in a government takeover, issued a kind of “non-denial” denial When asked by reporters earlier whether she anticipated nationalizing any large banks, Bair said: “I can’t comment. I’d be very surprised if that happened.” If there wasn’t a plan in the works, would she just say that. Refusing to comment almost seems a confirmation. At least, that’s how a lot of people are reading it.
If forced to give odds, we’d say that while Citi could be nationalized nothing as drastic will happen to Bank of America. It seems far more likely that Bank of America would receive something like the asset value guarantee Citi already got from the government.
In either case, we could be headed into another bailout weekend.