On MSN Money this afternoon, the following claim was made:
"Nationalization would not only cause millions of Americans to lose trillions of dollars, it would impose a system on the U.S. economy that would destroy its ability to recover for decades.
I think that is mathemematically impossible.
The largest bank in the United States is the Bank of America (BOA). Right now, it has a market capitalization of 19.62 billion dollars. What that means is, if you take the value of a share, and multiply it by the number of outstanding shares, you get, 19.62 billion dollars.
One (US) trillion is 1000 billion. If by nationalization, we mean share redemption -- everyone who has a share gets the cash -- then no one has lost anything. There isn't less wealth in the system that there was before the nationalization. This would result in quite a bit of cash being injected into funds and pension plans -- who are fearful of selling and ending up worse off at the end of the day.
Say that the top ten banks are just as large as BOA. That means we have only about a fifth of a trillion dollars in bank equity out there. The government then can do what it likes in terms of the outstanding debt obligations of these entities.
No one need be worse off under nationalization, save current management.