Bank Nationalization

There has been a lot of commentary over the past few weeks about the value of nationalizing major US banks like Bank of America and Citigroup.  Many feel that the current bailouts are propping up the shareholders at the taxpayer expense.  Given that bank shares keep going lower and lower, a commenter at Baseline Scenario raised an interesting question:

Nevertheless, if you are still feeling miffed that your tax dollars are inapppropriately [sic] propping up shareholder value, allow me to make a suggestion. Buy a hundred shares of Citigroup. Then you too can reap the largesse at tax payer expense. You don’t have to be rich. 100 shares of C cost about $420 presently [even lower now, given this was posted in late January]. I keep wondering, if the shareholders of banks are getting such a great deal at the expense of the tax payer, why isn’t everybody rushing to purchase shares of bank stock now?

(Emphasis mine)

The obvious answer makes the case against government intervention in the markets; shareholders are fleeing in part because of the fear of nationalization.

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