3 TRILLION needed to save US BANKS! Emergency Meeting this WEEKEND! Nationalization COMING!

By MICHAEL GRAY

Last updated: 12:31 pm
Posted: 3:09 am
January 25, 2009

The heat is on the Obama Administration.

Congressional leaders are pressing the White House to come up with a plan as soon as this week to save the banks and jumpstart the economy.

As the Obama economic team huddles this weekend in an attempt to hammer out the framework of their plan, three options have been bandied about:

* Nationalizing the banks.

* Creating a government-owned "bad bank" to take the toxic assets off of the bank's balance sheet.

* Continuing the Bush Administration rescue plan of pumping in taxpayer money on an as-needed basis.

A nationalization plan would likely wipe out all shareholder equity, including the preferred shares, and turn ownership of the banks over to Uncle Sam.

It's a long shot plan few favor - for many reasons. One, it would balloon the federal debt and, most likely, fuel a spike in inflation.

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On the upside, it would stop the drip-drip-drip of asset meltdown the banks and the Treasury Dept. have been dealing with since October - with no end in sight.

"If you took a nationalization policy, you would at least create some degree of certainty because now you know the government is going to stand behind these institutions," said Kevin Jacques, 49, a former economist with the Treasury Department.

As it stands now, "it's almost like some kind of weird partial nationalization," Jacques said.

For instance, the government took management steps at both Citigroup and Bank of America when it forced the banks to slash their dividends to a penny.

Moreover, there are 318 banking institutions right now receiving government assistance to prop up their balance sheets, and 8,000 firms in the US banking industry overall.

The trillion dollar question: How many of them would fall under the nationalization plan?
With a little over $350 billion already infused into the banking industry through TARP and countless billions through the Fed, many see the cash having little benefit for the economy. Plus, some Wall Street firms have estimated that it will take $3 trillion to right the banks.
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