Usually, the word nationalization is associated with Hugo Chavez or Evo Morales. But now Gordon Brown has joined the club. The UK government nationalizes the ailing Northern Rock--the UK bank that hit badly by current US sub prime mortgage crisis.
Add this action to the already signed US economic stimulus package, it got me thinking (and confused) on the way developed countries government handles financial and banking crisis
This is my simple math: nationalization plus "business as usual" equals moral hazard, because you just put too little stick -and perhaps too much carrot--into the equation.
Why don't they just learn from our experience, albeit developing country, with the messy BLBI, bank re capitalization, BPPN and all those government bail-out plan that have just led to a slow and mediocre impact on banking performance?
(HT: Marginal Revolution)