A matter of time

As many of you know, because of I am a marine biologist, one of my favorite topics to talk about is ---

the current credit crisis... bet you new readers didn't see that coming.

I persistently follow the Planet Money Blog, a reliable NPR based source of financial news. A post today (found here, by Adam Davidson) should be heeded by anyone who has stock in a major bank, BoA, Citigroup, etc. The question of the day was: will the government have to nationalize the major banks of America to prevent financial ruin? And the answer was very eloquently, "Can't tell you even if we wanted to." Essentially, the government will not discuss such a move in an open forum for one big reason --

The government official told me that if word leaked out in any way that the government was even considering nationalization, it could spook the stock markets so badly that all those troubled banks would, instantly, become dead banks. Citi, Bank of America and other big banks, have shockingly low stock prices. But some people think that they are still overpriced--that those banks are insolvent and the only reason their stock has any value is because many investors believe the government will bail them out. Nationalization would, in most scenarios, mean the stock would lose all of its value instantly.

So any inkelling that the government might nationalize the banks, by any major news source or politician, could collapse the banking system of America in hours.

So if it does happen, expect the following events to occur. The US stock market closes Friday. Rumors start to fly of emergency meetings in Congress. Saturday more rumors and leaks become available. And Sunday, the Adminstration comes forward to announce the US banks are not the US Bank. All before the markets in Asia open. Crazy.

And we wouldn't even see it coming --

[the] government official is the kind of person who normally, well, leaks; tells reporters interesting things off the record. This person wouldn't budge. Not an inch. I asked: so, if you were just in a meeting where you decided nationalization is, clearly, the best option, you'd tell me you had never discussed it, right? This person said: yup.