White House tries to stem fears of bank nationalization
The Obama administration today sought to quash talk that nationalization of some major banks was inevitable. That was at least good enough to pull bank stocks up from their lows, in a brutal session overall.
"This administration continues to strongly believe that a privately held banking system is the correct way to go, ensuring that they are regulated sufficiently by this government," White House Press Secretary Robert Gibbs said when asked about nationalizing the banks, according to the Associated Press.
"That's been our belief for quite some time, and we continue to have that," Gibbs said.
Earlier, bank stocks plummeted across the board after Sen. Christopher J. Dodd (D-Conn.), who heads the Senate Banking Committee, told Bloomberg TV that although he didn’t favor a government takeover of major banks, "I could see how it’s possible it may happen. I’m concerned that we may end up having to do that, at least for a short time."
Will they nationalize, won’t they, do they even have a clue? These are the same questions that have been dragging shares of Bank of America Corp. and Citigroup Inc., in particular, down for much of the new year.
Investors fear that mounting loan losses will force the banks to ask for more government capital, giving Uncle Sam an even bigger stake in the companies and wiping out common shareholders.
BofA plunged as low as $2.53 today, a 24-year low, but rebounded to close at $3.79, down 14 cents. Citi lost 56 cents to $1.95 after trading as low as $1.61.
BofA CEO Ken Lewis told employees in a memo today that the bank "does not need any further [U.S.] assistance today, and I am confident we will not need any further assistance in the future," Bloomberg News reported.
Maybe the biggest surprise is how Wall Street has been bashing Wells Fargo & Co. -- which until this year still was considered a certain survivor of the credit crisis. Wells fell as low as $8.81 today, though it recovered much of that drop to end at $10.91, off $1.10. The stock, a favorite of billionaire Warren E. Buffett, has plunged 63% year to date.
From the Associated Press:
Gibbs was pressed for more details on his answer -- specifically whether Obama would not nationalize banks. He said it was hard for him to be any clearer.
When a reporter suggested Gibbs could do that by saying point-blank that Obama would never nationalize banks, Gibbs would not make that statement, but emphasized: "I think I was very clear about the system that this country has and will continue to have."
Next week, we can start this debate all over again.
-- Tom Petruno
Photo: White House Press Secretary Robert Gibbs. Credit: Ron Edmonds / Associated Press