As the stock markets head for lows not seen since 1997, and Citigroup shares hover around $2, the word nationalization is on the lips of Democratic and Republican Congressional leaders, not just economics professors. The White House on Friday said it really preferred a private banking sector. Treasury, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, of the Office of Thrift Supervision, and the Fed weighed in with an amorphous joint statement on Monday, February 23 that utterly avoided the word “nationalization” — as if omission meant reassurance.

The obliqueness of the communiqué was redolent of the lengthy texts accompanying pharmaceutical instructions and warnings, starting off with a sonorous “A strong, resilient financial system is necessary to facilitate a broad and sustainable recovery,” as if readers might think the opposite were true. The audience learned that the stress test of the country’s major banks would begin February 25.  If the examinations turned up bad news, “institutions will have an opportunity to turn first to private capital.” Given the state of the equity markets, the second treatment—a “temporary capital buffer…from the government”—would surely quickly follow.

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