Whatever you may think {nationalization} means, I don't see the U.S. government operating a large institution for an extended period.
In fact, based on where we stand today, I would be surprised if the FDIC had to step in as conservator or receiver of a large, systemically important institution. The regulators' Joint Statement last week restated our commitment to preserve the viability of systemically important financial institutions. This will be done through capital injections, if needed, and the supervisory process.
If more direct intervention to take over a large financial group is needed, that will present significant challenges. The main hurdle is that there's no clear process for resolving a large financial holding company with multiple affiliates. We have a process for dealing with large banks, but not financial conglomerates.
Many have pointed to the FDIC's model of resolving failed banks as a possible solution. I believe the FDIC model is tried and true...But clearly, there would be practical problems if we had to use our resolution process for a large, internationally active institution. First, we do not have authority to resolve financial holding companies. Our powers extend only to federally insured banks.
Second, there is a very real question of whether our current funding mechanism is adequate to deal with the failure of a very large institution...
Another major problem, which has received less attention, is the difficulty in handing a cross-border failure. The key question is: What you do when more than one country is regulating a piece of the institution?