Nationalise the banks!

I thought I would break the long silence on this blog by posting on the need to nationalise the banks. The banking sector is in crisis. It can not service the short-term loans it has taken out and it lives in fear of untold losses from reckless dealing in mortgage-backed securities and other such instruments.

Some would say that the banks have made their bed and so should lie in it. However, the failure of banks has huge knock-on effects. Many other companies need credit from banks and not to have it would mean that they would have to close down and lay off staff.

The Government has recognised the need for a functioning banking sector by taking some equity stakes in banks and by offering them insurance for some of their new loans. However, this is not enough. RBS and Lloyds/HBOS are now 'neither fish nor fowl'. They are not nationalised nor fully-private companies. This is an untenable situation as it means that the state has part ownership but no control of organisations that could be racking up huge losses that the taxpayer could have to pick up through the recapitalisation mechanism or through the insurance scheme proposed.

After dithering for months, the Governemnt eventually nationalised Northern Rock and the mortgage arm of Bradford & Bingley. It now needs to bite the bullet and throw free-market dogma away and extend this nationalisation to RBS and Lloyds/HBOS. There is a petition calling for bank nationalisation and I urge people to sign it.