THE WORD FOR THE WEEK IS...

NATIONALIZATION

Here in America, we have people like Alan Greenspan, David Walker and Sen. Lindsey Graham acknowledging that it may be necessary to take over some large U.S. banks and the Germans are thinking along the same lines.

Q+A - Germany drafts legislation to nationalise banks
Wed Feb 18, 2009 5:28am EST
BERLIN, Feb 18 (Reuters) - German Chancellor Angela Merkel's cabinet has approved a draft law which would allow Berlin to nationalise stricken banks and, as a last resort, expropriate their shareholders to shore up the financial system.

The draft legislation, an extension of Germany's existing bank rescue law, was formulated to allow the government to take control of Munich-based lender Hypo Real Estate (HRXG.DE), a high-profile casualty of the financial crisis. Hypo has received a total of 102 billion euros ($129 billion) in guarantees from the state and fellow banks but its financial condition remains uncertain. Because of its key role in the 800 billion euro Pfandbrief covered bond market, the government has said it cannot be allowed to fail.

Germany has said no other banks are in the same difficult position as Hypo Real Estate, but if the financial crisis worsens, other German financial institutions could come under pressure and force the government to intervene.

Last month the government took a 25 percent stake in Commerzbank (CBKG.DE), which on Wednesday reported an operating loss of 822 million euros for the fourth quarter.