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What are the advantages/disadvantages of nationalising the banks? watch

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    As per the title. Interested in some reasoned analysis of the issue from people who know about such stuff without partisan hackery. As it's an issue I'd like to know more about.
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    Advantages: The government could keep a closer eye on what theyre up to
    Disadvantages: Massive loss in useage by firms and foreigners who dont want a government with intimate access to their finances, the state is generally incompetent at running things aside from transport and it would cost a fortune to nationalize them. Not to mention it would give allof the banks current liabilities a blank cheque from the tax payer.
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    (Original post by DeBruyne18)
    As per the title. Interested in some reasoned analysis of the issue from people who know about such stuff without partisan hackery. As it's an issue I'd like to know more about.
    Generally nationalized banks are likely to be less competitive and less efficient worsening the outlook for the economy to an extent. In particular scenarios, however, such as the financial crisis, it can be very beneficial to 'bail out' the banks in order to prevent further problems from arising within the economy. Sure one could blame the banks in the first place for taking 'risky' investments and reducing their liquidity by continuing to lend and distribute the loans, however this lead to growth and prosperity up until the bubble burst. In this case, nationalising the banks during insolvency is what allowed the economy to slowly recover again, it was a massive waste of taxpayers money, but other options were not available (quantitative easing helped). The issue was also that bondholders had the full incentive in investing in these risky banks as they were guaranteed to get their money back, due to the 'too big to fail' principle, the governments had full reliance on these banks and knowing this the private banks took full advantage. One solution to this may instead be new 'bail-in' rules where bondholders are held more accountable, however as shown in examples such as Italy it may lead to delayed recapitalization due to political perceptions.
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    Advantages. - It sounds like a good idea.

    Disadvantages - British Leyland.
 
 
 
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