Nationalization of the banks in US

Ice Dive SG

I have been occasionally reading up on the news and have come across notions that nationalising the banks will wipe out the shareholders .....

Anyone care to make a guess why will it be so bad for shareholders ?

Rednano SG

govt controlled

Worldlybusinessman SG

if the banks left to private corporations, they will scam and run away with money, as it has already happened. Better to be under govt controlled as govt is part of electoral process and answerable to public.

Ice Dive SG

Nothing bad about govt controlling at this point in time , can it be any worse ? However this is not what I am refering .

I am refering that if the bank is to be taken over by the govt. Does it mean that the current shareholders are not able to get a single cents for what they initially owned ?

Worldlybusinessman SG

it depends on the govt. how they handle and manage the take over. its hard to say. Right now speculations are on the negative side. But normally speculations have an agendA

Worldlybusinessman SG

to me if u ask it doesnt make a difference because recession is already here.

angel7030 SG

state own business had show a stagnant and lack of the niche in an open market, that is why most of the Chinese stateowned companies are now privatised, under private managements, organisation restructured itself to suit the environment better.

Nationalisation is a return to stateowned business, that is because private managements are liable to greed and individualism, leading to organisations poor performances, perhaps we can see a shift in the pardigm back to stateown culture.

Same goes to Singapore, singtel, capitaland, etc etc, were each privatised to stay relevant and competitive but still Link to govt.

What USA is having now is the same as singapore, get a hold on the share, made them a GLC, and when time are good, sell back to whoever wants to buy. In actual fact, the USA govt are buying at a good price now, and hopefully when the economy pick up, they will be rich.

Nationlisation or Stateowned organisation lack to urge to compete, cos the peoples there alway think that govt will alway pay them, that was where the phrase "iron rice bowl" came from, it only encourge laziness and stagnatisation

Ice Dive SG

There could be quite a difference depending on how the clause behind the contracts and how the nationlization is done ....

I cant be 100% sure but taking similar situation to consideration. If a company is declared bankrupted (depending on under which chapter ) , they do not have pay outstanding debts , so the other party can only write off those debts.

Likewise for credit default swaps whereby people (usually investment cooperations) could go into to hedge risk for defaulting. But if like AIG ( the issuer of such a instruments ) are to be declare bankrupt, the amount of write down will be tremendous too .

I wonder if nationalising of banks is such a case too whereby the resulting effects in a mid or short term position will affect lots of other entities involved.

Worldlybusinessman SG

now wha u talking about u young prick?

where did u cut and paste that from? Dont make unker unhappy ok?

it depends on the the vision, mission values of the the state who is owning the organisation. But private coprporations never had the moral obligation. Not that i heard of.

competition is subjective. Even if state owned , they can compete among themselves ( another statown) to bing about more choices and alternatives. ot maybe start a sister organisation or subsidary.

now go and drink yr milk bottle. u are too young here anyway angel.

angel7030 SG

now wha u talking about u young prick?

where did u cut and paste that from? Dont make unker unhappy ok?

it depends on the the vision, mission values of the the state who is owning the organisation. But private coprporations never had the moral obligation. Not that i heard of.

competition is subjective. Even if state owned , they can compete among themselves ( another statown) to bing about more choices and alternatives. ot maybe start a sister organisation or subsidary.

now go and drink yr milk bottle. u are too young here anyway angel.

now what are u talking about...where i got prick???

Senile Uncle, please lah, i hv never cut and paste, i dun post like my uncles do, or lionoisy does. Stateown organisation is the same as GLC, just that now it is run by professional wage earners management rather than ministers or high rank govt.

During the revolution of Communist industrial in the late 80s and 90s, so much ministers and govt management gone out of jobs, so much trimming was done to make the organisation lean and mean, that a steel industry of 40 thousand workers find themselves workable with only 10 thousand workers. The revolution to cut down nationlisation of industries had proven a great success in china economy. However, there were 10 of millions who lost their jobs, and who dun believe they will lost their jobs. But because of the industries changing to support Privatisation, more FDI pour in with western management concepts and personnel, they will re employed back into the market and enjoyed better incomes and living standard

Smosh SG

I have been occasionally reading up on the news and have come across notions that nationalising the banks will wipe out the shareholders .....

Anyone care to make a guess why will it be so bad for shareholders ?

They used these investment to earn their income. If government is taking over, then these investor would be forced to sell their stocks at a lower price than they would possibility get or even possiblity suffering a loss. The investors,we talking about here can be anyone on the street.

They had been damaged by the management and now they to face another wave of damage. If i'm them, i guess i would be piss off too. Nationalisation would jar their trust and make people loathe to invest in banks even when the financial crisis is over.

Though i think people would probably forget about it and move onto another economy opportunities But then.. this is the psychology of some of the people.

Daddy!! SG

Citi could only pay 1 cent dividend for the next 3 years. in current bear market, valuation of citi shares should be less than 50 cents per share.

a big draw back of public bail out money is that the government, being accountable to the tax payers, would demand as early pay back as possible and that includes selling the shares at a profit. both of which are negative for shareholders.

If Citi is nationalised, the first thing to happen would be to stop/sell all its international banking businesses (for example, does it make sense for Singaporeans to borrow from US government-owned Citi to buy a private apartment in Singapore?) and keep the bank 100% onshore.

Daddy!! SG

i came to know about a CEO who thought Citi was cheap at USD 9.00 and bought with most of his wealth. Though he still drives a mercs, most of his wealth is now in smokes.

Another high profile person who lost 80% of his wealth is the casino magnate Stanley Ho (widely publicised in newspapers).

Daddy!! SG

if Temasek and GIC are not careful, it is possible to lose 80% to 90% of their portfolios.

angel7030 SG

if Temasek and GIC are not careful, it is possible to lose 80% to 90% of their portfolios.

they have changed their CEO, do you think they are not careful meh???

Ice Dive SG

I guess it make sense to me as a consumer as long as they give competitive rates. It also make more sense for the US govt to operate in various countries.

Ice Dive SG

Does govt owned means that they have to delist ?

Daddy!! SG

it does not make sense for US govt to lend to Singaporeans. for instance, if a Singaporean defaults on his mortgage, then the US owned citi bank will have to foreclose and auction it off to other investors. kinda inappropriate. if a Singaporean defaults on his US govt owned citibank credit card, then the us state bank will have to hire hit men on the streets to chase the money. kinda inappropriate.

kinda inappropriate for US state bank to chase profits in Singapore and in other countries.

Daddy!! SG

even if Citi is not nationalised, any profits will be used to repay the government's bailout loan such that shareholders will not collect any significant dividends. Question now is in how many years could Citi repay its debt? based on its average P/L for the last five years, it would take hundreds of years to repay. these banks are dead zombies unless US govt is willing to risk public outcry to write off its debt to citi (very unlikely).

Ice Dive SG

Repayment of debts may not be from P/L totally. Sales of assets or business units which look more likely now then ever.

Raising of money from preferrential offers , stock split etc are also common methods. In the worst case , they will just operate with net debt then. I do see quite a number of companies operating with net debts (even though they are profitable for the particular financial year ).

I guess when the economy is getting better , citigroup could become profitable but still carrying these outstanding debts. In the nutshell , people may not see the debts to be as big as a matter as it use to be and the share price will once more follow the speculative sense of a bull economy. Afterall United states itself has been in debts for a long time too .