There's been a quiet refrain in the nationalization debate. The theory seems sound. The toxicity of the assets is fairly well-established. Many of the banks seem likely to be insolvent. But what does it look like to nationalize them? How do you do it? Who does it? Are they any good at?Last week's This American Life -- which you can stream here -- included a long segment following the FDIC's nationalization of a single bank in Washington state: The Bank of Clark County. If the FDIC agents had tear gas rather than briefcases, wed understand them to be a SWAT team. Eighty of them flew into Clark County, checked into hotels under assumed names, gave false reasons for their visit, and around 6 P.M. on that Friday, walked in and assumed control of the bank. By all accounts -- including those of the employees at the Bank of Clark County -- the FDIC was almost startlingly competent, professional, and sophisticated. Even the workers who were seeing their labor dismantled and their jobs destroyed sound impressed by the cool efficiency of the Feds. Most of the story is, in that way, actually quite comforting. But towards the end, the reporter sounds a more cautious note:The Bank of Clark County had 100 employees and assets of $440 million which, if you're not used to bank numbers, is a really small bank. But it took 80 FDIC agents, 50 bank employees, and 100 employees [from the neighboring bank that assumed control] working round-the-clock for three days to take it over and have it reopen for business. Most of the largest banks in trouble right now -- Citibank, Bank of America -- are about 6,000 times the size of Bank of Clark County, not to mention much, much more complicated.
That doesn't, of course, mean that we'll have any other choice when the dust clears and the assets are priced. If the banks prove insolvent, we'll simply have to take them over. It won't be debated so much as determined. And the FDIC is certainly accruing experience: The segment says that recent months have seen two bank takeovers per week.
