"Nationalisation can’t easily be executed and then unwound, private equity-style,"

From Alphaville:

"Lombard: Nationalisation needs prudence and patience Posted by Andrew Hill on Jan 21 11:35.

They must be out of practice, but those in favour of rapid nationalisation are making some terrible arguments for sweeping British banks into public ownership. Here are the three worst:

1. I’ve started so I’ll finish.

The government’s action so far has been condemned as “creeping nationalisation”. But the good thing about creeping, as opposed to sprinting, is that it’s easier to stop( SAYS WHO? ) and reverse course if obstacles are in the way( IT'S ALSO VASTLY MORE EXPENSIVE ). It’s true the government took time to conclude in 2007-08 that nationalisation of Northern Rock was the best way out of its predicament. Some Labour supporters believe the Conservatives might have done the deed more quickly, because they carried less ideological baggage about previous failed nationalisations. But the conclusion of that sad affair is not that the government should nationalise at the first sign of trouble( FOUR MONTHS ) but that it should move more swiftly to try other options.

2. Put shareholders out of their misery.

Equity holders’ misery is indeed profound. Insofar as they were active backers of the expansion drive pursued by some banks, notably Royal Bank of Scotland, until the credit crunch hit, they deserve to suffer the consequences. But apart from the risk of full nationalisation, few believe RBS shares are really worth 10.3p, down more than three quarters since last summer. Those still invested in the bank and its listed rivals presumably want to retain an option on recovery. To “put them out of their misery” would also be to put them out of their potential profit, however far off that seems. Retribution, yes, but also expropriation.( THEN DON'T TAKE OUR MONEY! YOU SHAREHOLDERS CAN LOAN MORE MONEY TO THESE BANKS WHOSE STOCK YOU OWN. )

3. It may be messy, but it won’t last long.

Nationalisation can’t easily be executed ( IT IS EASIER ) and then unwound, private equity-style, whatever Guy Hands or Jon Moulton may say. As they know well, that trick is hard enough for buy-out firms to pull off these days, let alone governments.

Let’s make no mistake: public ownership would be for the long haul( BS ). The longer it took to refloat the banks, the more obvious the disadvantages and dangers would become: distortion of competition (either too much, under government protection, or too little if the whole system were nationalised); politicised lending; the withering of the City as a contributor to the UK economy; the ravaging of sterling; the potential destruction of Britain’s sovereign rating.

Some of these threats are already evident. Lloyds TSB, down an extraordinary 31 per cent on Tuesday, is already pricing in a domino effect that could be triggered by full nationalisation of RBS. Having crossed the ideological Rubicon with Northern Rock, there are good reasons why the government should not rule it out. Pricing toxic assets is hard( THEY WILL OVERPAY ), but with the full backing of the state’s balance sheet, the non-toxic assets could be distilled from a bank without having to set a perhaps( ? ) artificial value for the rest. If there were evidence of a run on RBS or Lloyds, experience suggests nationalisation would be the best way of calming the panic. But outside the stock market, there is no run( THERE'S A PROACTIVITY RUN AND SAVING SPREE ). The latest and most comprehensive package of government proposals remains untested. If there’s a need for speed, it is in fleshing out those plans. To jettison them now in favour of action that would be hard to reverse would be impatient and imprudent( LIKE TARP,A HYBRID PLAN, HAS PROVEN ITSELF TO BE. )."

These are good warnings, but very poor reasons.