Are Markets Down Because of the Threat of Nationalization of the02-23-2009 |
I believe that the overall fear associated with the threat of nationalization of the banks, and the general outreach of the U.S. Government that we have seen thus far in 2009, is one of the primary anchors weighing down the markets right now. In my opinion, the reason this is not only impacting the financial sector is because of the widespread implications of the banking system on the entire U.S. economy. As we saw during 2008, when the access to credit, which is primarily controlled through the banking system, is hindered, or shut down completely, economic engines cease to function as credit is the oil that makes the engines run.
Credit availability remains at the core of economic recovery efforts and the markets seem to be generally concerned, in principle, with the thought of Government controlling the current private banking sector. Senator Dodd suggesting recently that a short-term nationalization of the banking system may be near certainly did not help matters in this regard although, as I write this post, the White House just issued a statement essentially saying that they strongly believe that the privately held banking system is the way to go.
Yet more uncertainty for a market that continues to look for clarity.