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banks, often ones that are quite important locally. In some countries these cannot legally be owned by a foreign government like the U.S., even indirectly. Therefore, there would be the need to take some major step fairly quickly, most likely to put any such banks on the auction block.

There might be other changes in direction that are dictated by policymakers, such as cutting back on the volume of proprietary trading positions or targeting an increase in mortgage lending.

One of the first steps of the new CEO would doubtless be the initiation of a major strategic review. It is important to move quickly on this, but it is at least as important to develop a sound plan. The best plan would incorporate the following principles:

Determine which units and activities are central to the bank’s mission. This is always a critical part of any strategic plan that is more than a modest revision of an existing plan, but it is of particular importance in this case. First, the radical action of nationalization provides a fresh start without the preconceptions that can build up within any organization. Second, taxpayer support for the government’s financial rescues is based on enhancing the banks’ abilities to perform their core missions, principally acting as an intermediary between savers and those who need funds.

There will be units which are clearly in the core and others that clearly are not. However, there will also be some tough judgment calls. For example, would Citigroup’s wideranging international activities be part of the core, because the decision is for it to be a truly global bank, or noncore, because the government’s main interest is the U.S. financial system?

Tailor strategic decisions to take into account the new government ownership. There may be some activities that make sense as a purely business matter, but which feel inconsistent with the business mission of a nationalized bank. For example, proprietary trading can be a profitable activity that takes advantage of the expertise resident in a bank, and the many opportunities that it sees as a financial intermediary, to trade profitably for the bank’s own account. However, it tends to be capitalintensive at a time when taxpayers are supplying the capital and it can seem like gambling to the public. Large proprietary trading losses would present a very unfortunate image for the newly nationalized bank.

Some operating decisions may need to be altered. Certainly there will need to be careful attention paid to the compensation strategy. Tax strategy is another area that may need to be altered. Corporate tax laws are extremely complex and there are often ways to hold down taxes where there can be a legitimate difference of opinion as to the proper treatment. Some banks are more conservative, while others are more aggressive in their tax positions. A nationalized bank will need to be conservative in this regard. It would send the wrong signal for a governmentowned institution to be seen as pushing the edges of the envelope in this area.

Determine how to fix the core businesses. The answers here will depend heavily on specifics. It is possible that the main problems have already been fixed as a result of the intense scrutiny resulting


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