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Killing Zombie Banks

You can add another prominent Republican to the list of those advocating bank nationalization. In today’s Financial Times, James Baker writes, “As president Ronald Reagan’s secretary of the Treasury, I abhor the idea of government ownership – either partial or full – even if only temporary. Unfortunately, we may have no choice.” Baker’s prescription: “We should divide the banks into three groups: the healthy, the hopeless and the needy. Leave the healthy alone and quickly close the hopeless. The needy should be reorganized and recapitalized, preferably through private investment or debt-to-equity swaps but, if necessary, through public funds. It is time for triage.”