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On the positive side, this would be an excellent opportunity for a publicspirited CEO candidate to take on a daunting challenge. If successful, they would ensure themselves a place in history and, if desired, the ability to move on to another CEO position that would pay far better or perhaps into a political career or a cabinet position.

These positives ensure that there will be candidates with at least marginally acceptable qualifications. However, the vetting process will be an important one and doubtless a timeconsuming one, if done carefully. The Administration would be wise to start designing a process now, in case it ever proves necessary.

The preceding discussion assumed that a new CEO would come out of the ranks of existing bank senior managers. This, or a successful recently retired manager, would be the best option because the position is not one for a rookie. There are doubtless many at the Fed and in other positions of public service who understand banks well, but it is one thing to be able to analyze a bank and another to have the experience to run one.

Step 9a: Announce the nationalization(s) The announcement itself is worth very careful consideration. Among the key issues are:

Maintaining confidentiality until the takeover. As will be discussed in Step 9b, it will be necessary to make a comprehensive announcement that reassures a number of different constituencies, including the stakeholders in other large banks who may fear nationalization as well. Having the information leak out piecemeal in advance would present a grave risk of panicking the markets and possibly forcing premature action. Banking regulators have a very good history of maintaining confidentiality, but they have never faced a challenge this formidable, both in terms of the financial impact of a takeover and in terms of the number of policymakers and advisors who ideally would be involved.

Making a clear case for the actions. It has proven to be very difficult to explain the various steps in the financial rescue packages in a way that resonated with all key constituencies, including: the public; Congress; the banks; and the broader financial markets. The Administration and the various regulators will need to have a clear, compelling set of justifications for their actions, which will be a true challenge. For example, there are multiple overlapping arguments put forward by advocates of nationalization. The government needs to choose among them, since it is unlikely that the actual takeover policies chosen will be consistent with all the different potential rationales.4

Putting the full weight of the government behind the actions. This will be a momentous step if it is taken. The success of the seizures may well determine whether the recession ends soon or turns into a true nightmare that will be remembered for decades. The beginning would be one of the most

4 Please see, “Bank Nationalization: What is it? Should we do it?”, for a longer explanation of the different arguments.

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