"he reckons it may be the best way of preventing a “bad recession” from descending into a “deflationary bust.”

From Alphaville:

"Nationalisation Magnus Opus Posted by Tracy Alloway on Jan 21 09:25.

UBS’s senior economic adviser, George Magnus, has thrown his hat into the bank nationalisation ring.

Magnus, like many others, is starting to see an increasing likelihood of full-scale bank nationalisation. What’s more, he reckons it may be the best way of preventing a “bad recession” from descending into a “deflationary bust.”( A CALLING RUN. WE'RE IN IT )

Selected excerpts from his latest “Economic Insights - By George” below.
Yet again, events are moving quickly as governments and banks, including some ring-fenced institutions, battle to contain the destructive and spiralling effects of asset price decay and de-leveraging( A CALLING RUN. DEBT-DEFLATION. ). We are now moving fast towards a second round of capital injections, a further expansion of loan guarantee( YES ) arrangements, and, importantly, towards a formal establishment of bad bank or bad asset schemes, with a rising likelihood of more widespread nationalisation.( YES )

Here then lies another chance for governments to be bold and assertive in trying to implement some of the five key policy imperatives, in this case to strengthen banks, unblock credit arteries and breathe life into failed or illiquid markets. But they need to ensure that their best plans are neither half-hearted, nor hostage to the opinions of those with vested interests( THE BANKS ), or with an enduring but dangerously naïve belief that government intervention is intrinsically bad. For, if truth be told, there will have to be more full-scale nationalisation of weak or basically insolvent banks anyway - in addition to those that work with government support - and the sooner we get there, the better, and the less costly it will be.( I COMPLETELY AGREE )

To top it all, of course, the underlying weaknesses in the financial system have again become more exposed since the start of the year. A number of wellpublicised problems at particular banks represent the tip of a generic financial system iceberg, the nature of which we have explored at length in past issues of Economic Insights. Essentially, banks deemed integral to the financial system, have to be more than adequately capitalised to cope with enormous losses on securitised assets, and of course, more conventional credit losses that are coming with the recession. They also have to be allowed to de-leverage in an orderly fashion( WITHOUT A CALLING RUN ), but as we know now, this can only occur with the help of the State( TRUE ). Full-scale nationalisation of some banks, as recently occurred in Ireland for example, remains a quite likely outcome, and may indeed be the only way in which the good and bad assets of weak or insolvent banks can be sold off and disposed of, respectively.( YES )

One way or another, the goals must be: to shut down bad banks, most likely involving full nationalisation for some, restructure and sell the salvageable parts of the bank, and put bad assets into a national fund, where they can rot (at taxpayers’ expense) or return a profit over time; to get weaker but viable banks to merge; and to allow good banks to complete their write-downs quickly, and benefit from new capital.( I AGREE )

UBS estimates, by the way, are that US and European banks will require something like a whopping $1,000bn of additional capital to see out the financial crisis — with $400bn of it needed a.s.a.p. (i.e. this year)."

Then that's what it takes. If we keep tinkering, the price will double.