Why Nationalization May Not Be an Option for the US
By Dyske February 16th, 2009
This is a convincing article about why the US could never nationalize their big banks. Even though the article does not talk about derivatives, unlike the Japanese banks, the American banks are too inter-connected with instruments like Credit Default Swaps (CDS). Nationalization will probably trigger CDS contracts, and there will be a domino effect of failures. This means the US government is cornered; every solution seems to have serious side effects. Their hands are tied.
The rest of the world (especially Japan) will have to come up with a fundamentally different business model from what they had before which was to feed the seemingly bottomless demand of the US consumers. Any nation counting on the US to lead them out of the recession would be the last to get out of it.
