Nationalization as Option

Great post on the Bronte Capital blog about bank nationalization (and lack thereof).

Basically, having nationalization as one of many options on the table for dealing with problem banks is the secret ingredient that made the Swedish model, well, such a good model. It's also the lacking ingredient in the US model such as it stands right now. We might still be headed that way though considering the groundswell of political support the nationalization concept is gathering these days.

Adding nationalization as a possible outcome (if, say, a bank fails the much-talked about stress test) should clarify the whole process a great deal and allow for a few banks (the ones that do not get nationalized) to become 20 or even 50-baggers as were a few Swedish banks in the mid-90s.