Tuesday, February 19, 2008

Rock Nationalization

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)


  1. moral hazard is part of the assessment i think. that's why rock is still downgraded by moody.

  2. http://rongrong19850510.blogspot.com/

    this is my blogger. do add it into your bookmark even if I cannot promise I will really write on it often.

    Give me some incentive and pressure,maybe I can do something for the world...

    Black Beauty

  3. most big banks realise they are too big to be allowed to fail.

    the rock's nationalisation doesn't really tell us anything new in that respect.

    sooner or later this moral hazard will bite tho...