Greenspan Supports U.S. Bank Nationalization

Greenspan told FT that the nationalization of U.S. banks may be the last "bad option" to fix this economy.

"It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring," he said. "I understand that once in a hundred years this is what you do."

"Speaking to the FT ahead of his speech to the Economic Club of New York last night, Mr Greenspan said that “in some cases, the least bad solution is for the government to take temporary control” of troubled banks either through the Federal Deposit Insurance Corporation or some other mechanism," reports FT.

According to the newspaper Lindsey Graham, a Republican senator for South Carolina, said that many of his colleagues, including John McCain, agreed with his view that nationalization of some banks should be “on the table”.

“You should not get caught up on a word [nationalisation],” he told the Financial Times in an interview. “I would argue that we cannot be ideologically a little bit pregnant. It doesn’t matter what you call it, but we can’t keep on funding these zombie banks [without gaining public control]. That’s what the Japanese did.”

Barack Obama, the president, who has tried to avoid panicking lawmakers and markets by entertaining the idea, has recently moved more towards what he calls the “Swedish model” – an approach backed strongly by Mr Graham.