Nationalization of the banks means

Anything is better than nationalizing banks

Actually, things don't look very good. All over the world, the states are pumping one billion after the other into the tumbling financial system - and yet the bad news from the banking towers does not stop there.

Nobody can say today how deep the black hole really is, into which state aid is disappearing. The International Monetary Fund estimates that the banks in the US and Europe will lose up to $ 1,100 billion as a result of the financial crisis - but according to the IMF it could also be a good 2,200 billion.

The uncertainty of how much money can still be raised to cope with the banking crisis is driving finance ministers around the world to sweat with fear. Even friends of the free market economy recently think the “full nationalization” of banks is a great thing. This is the only way to prevent banks and states from collapsing. They also have a good argument on their side: if taxpayers have to pay for bank mismanagement, then they should have access to the assets of the houses they save.

 

Failing overseers as bosses?

“Of course” the state would then have to “screw up” the taken over banks again. Sure - politicians are by no means to be trusted on this issue. In this country, state-owned companies are preferably only sold when they have been run down - see Austrian Airlines. If state-owned companies make profits, however, concerned representatives of the people run a storm against the "sell-out" of dressed-up "state jewels". Why should it be any different with the banks of all places?

In addition, the banks - at least in Austria - are not yet restructuring cases. They currently lack fresh capital because there is hardly any money to be had on the market. The state, as the “lender of last resort”, can help with this question - no more than that.

The question also arises, why should states that were already hopelessly overwhelmed with banking supervision suddenly be entrusted with the operational business? At this point usually comes the cute answer that now is not the time for “ideological trench warfare”. In other words: Anyone who does not believe that civil servants and politicians who did not even know how to manage the bubbling taxpayers' money in times of economic boom can now rehabilitate banks is a stubborn ideologue. However, anyone who thinks that the state has suddenly become a born business leader can buy a ticket to the elegant club of cosmopolitan pragmatists.

It is often overlooked that state banks did not cut a particularly good figure during the financial crisis. In Germany they were the first to be saved from ruin (the same applies to Austria with Hypo-Alpe Adria).

Private owners have shown that they can fail to run banks - but the state has never shown that it can run credit institutions or other companies successfully. ÖBB, Asfinag, AUA and ORF hardly fall into the category of state-run model companies. Not to speak of the fate of the “Z” and the Länderbank, as well as the post hacking in state-affiliated companies, which cannot be exterminated.

It would be a terrible mistake to box de facto bankrupts out of their responsibility by nationalizing troubled banks. The message would be clear: “Don't worry: Whenever you speculate, Papa Staat is there for you!” A kind of fully comprehensive insurance that would pave the way for the next financial crisis. When the smoke has cleared, there would be no more reason for the banking industry not to take enormous risks again.

 

Clean up the damage yourself

Of course, doing nothing is not an alternative. The state should lend money to ailing institutions. The funds are to be repaid with interest and compound interest, even if it should take decades. This gives the owners of the banks the opportunity to repair the damage themselves. And they can undoubtedly do that better than political commissioners who are suddenly supposed to play bank managers.

The public sector can also buy bad loans and papers that have become worthless from the ailing banks - but only on the condition that the banks pay off the possible loss of value over the years. So anything would be better than a large-scale wave of nationalization that ends in a new billion-dollar grave into which generations will have to shovel their money.


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("Die Presse", print edition, January 31, 2009)