Graham Wouldn’t Reject Idea of Nationalizing Banks
Feb. 15 (Bloomberg) -- Republican Senator Lindsey Graham, who sits on the Senate Budget Committee, said he wouldn’t reject the idea of nationalizing U.S. banks.
“I’m very much afraid that any program to salvage the banks is going to require the government,” the South Carolina senator said today in an interview on ABC’s “This Week” program. “I would not take off the idea of the nationalizing the banks.”
Bank of America Corp.’s stock-price descent, down about 60 percent this year, gained momentum earlier this month on speculation that the government might seize the company. The U.S. already agreed to inject $45 billion and protect the Charlotte, North Carolina-based lender from losses on $118 billion of loans and securities after it bought Merrill Lynch & Co.
Citigroup Inc., whose shares have dropped 87 percent in a year, needed $20 billion in government money in November on top of an earlier $25 billion injection. That wasn’t enough to keep it from announcing plans to split itself into two companies after posting a $8.29 billion fourth-quarter loss, completing its worst year, as the credit crisis eroded mortgage-bond prices and customers missed more loan payments.
Graham, without naming any banks, said “toxic” assets spread throughout the banking and finance sectors may require further government help of a kind not envisioned a year ago.
“To me, banking and housing are the root cause of this problem,” Graham said. “If you don’t stabilize housing, you’re never going to fix this problem. You’ve got a huge inventory problem. You’ve got foreclosures that have to be dealt with. And that goes back to banks.”
Democratic Senator Charles Schumer, speaking on the same program, said he isn’t in favor of nationalization for banks.
“I think government is not good at making these decisions as to who gets loans and how this happens,” the New York senator said.
Representative Maxine Waters said on ABC that “the word nationalization scares the hell out of people, and so the debate has opened up now, and that’s good.”
“Citibank is probably almost nationalized with the amount of money we’ve put in it,” the California Democrat said. “But I don’t think that we are ready to move to the point of a formalized nationalized banking program yet.”