Bank Nationalization: Are U.S. Banks Already There?

Speculation about possible bank nationalization by the U.S. government is driving down shares in the the banking sector again today (Friday). However, there’s plenty of uncertainty of what nationalization would actually look like, or if the banks are already nationalized.

Nationalization would give the U.S. government the power to control banks. That power could mean anything from taking control of the public shares to replacing existing management, installing a new board of directors and setting corporate strategy. But the lack of clarity surrounding nationalization has created confusion on what’s the best path the federal government should take.

Under TARP, the U.S. government owns a majority of the preferred securities in all of the banks that received aid in the program. These shares are first in line in the hierarchy of shares, and have put many bank shareholders in the back seat. Many are claiming that the U.S. banking industry has already been nationalized as a result.

Bottom Line, we will just have to wait to see if we have bank nationalization in our future.

Bank of America: Welcome back to your 1980’s valuation

Think about it. Bank of America (BAC), and its subsidiaries Countrywide and Merrill Lynch are trading at under $3.00……….combined.

If someone had mentioned this 3 years ago, they would have been swiftly committed to the nearest asylum. However, as the 2009 Economic Crisis continues, situations like Bank of America are becoming all too common.

Bank of America makes first TARP interest payment

Bank of America Corp. has said it made its first dividend payment to the U.S. government under the Troubled Asset Relief Program this week. Many claim that this government ownership has effectively “nationalized” the nations backs as mentioned above.

The $402 million payment is tied to the preferred shares issued to the government in return for a capital investment of $45 billion made in late 2008 and early 2009. The Charlotte bank said it will make about $2.8 billion in dividend payments to the government in 2009.

“It is our intention to pay back these loans, as soon as possible,” said chief executive Ken Lewis in a statement. “In the meantime, we are using these funds to support the U.S. economy by extending credit to individuals and businesses.”

Bank of America’s Lewis gets subpoena from Cuomo

Well, keep on supporting the economy Mr. Lewis. By the way, the Bank of America Corp. Chief Executive has also received a subpoena from the New York state attorney general’s office in connection with Merrill Lynch’s payment of employee bonuses before the companies combined on Jan. 1.

Now that is adding insult to injury for the Bank of America CEO.

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