Epiphanies

Greenspan Backs Nationalization

Former Fed chairman says it’s the least bad option.

The high priest of laissez-faire capitalism has spoken—for nationalizing the banks. Former Federal Reserve chief Alan Greenspan says the U.S. may have to nationalize some banks temporarily to right the financial system and get credit flowing again, arguing it’s the least bad option for policymakers. “It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring,” Greenspan told the Financial Times ahead of a speech to the Economic Club of New York. “I understand that once in a hundred years this is what you do.” Taking temporary control of troubled banks through the FDIC or another mechanism, he said, would “allow the government to transfer toxic assets to a bad bank without the problem of how to price them.” He added one note of caution: Senior creditors of any nationalized bank must be protected “to preserve an anchor for the financing of the system.”