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Mixed message on nationalized banks

Bloomberg News / February 21, 2009
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WASHINGTON - Senate Banking Committee chairman Christopher Dodd said banks may have to be nationalized for "a short time" to help lenders survive the worst economic slump in 75 years.

"I don't welcome that at all, but I could see how it's possible it may happen," Dodd said yesterday in an interview to be aired this weekend.

Bank of America and Citigroup, which received $90 billion in federal aid in four months, tumbled as much as 36 percent yesterday on concern they may be nationalized. The Obama administration yesterday said a "privately held" banking system is the "correct way to go" and House Financial Services Committee chairman Barney Frank said nationalization ought "to be avoided."

The Obama administration turned aside questions about a federal takeover of banks, saying a "privately held banking system is the correct way to go, ensuring that they are regulated sufficiently by this government," White House spokesman Robert Gibbs said yesterday at a briefing.

Senator Jon Kyl, the second-ranking Republican and a member of the finance committee, agreed with Frank, saying nationalizing US banks is "out of the question" and isn't going to happen.

"I don't think it's something the market has to worry about," Kyl, an Arizona Republican, said after Dodd spoke. "There are plenty of tools that we have short of that to deal with the crisis."

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