Accessibility links

Breaking News

Wave of Bank Nationalizations Could Be Looming

Governments around the world have already poured billions of dollars into failing banks. Now, a growing number of governments are considering seizing control of the banks entirely.

The Cabinet of German Chancellor Angela Merkel is backing a bill that would allow her government to forcibly nationalize banks that have received government aid.

The legislation still needs approval from German lawmakers but the chancellor says she would use the measure to nationalize troubled Munich-based lender Hypo Real Estate.

Hypo has received more than $120 billion in loan guarantees, and officials warn its collapse could have devastating effects on the German economy.

The former chief of the U.S. central bank is also supporting the idea of "temporarily" nationalizing banks.

Former Federal Reserve Chairman Alan Greenspan tells the Financial Times it may be the only way to restore confidence to a shaken financial system.

As Fed chairman, Greenspan had been a strong advocate of letting financial institutions regulate themselves. But he now says nationalization may be necessary, calling it something you do "once in a hundred years."

Republican U.S. Senator Lindsey Graham also tells the Financial Times that the U.S. should consider taking control of some banks, saying "we should be focusing on what works."

Meanwhile, Ukrainian Prime Minister Yulia Tymoshenko is trying to reassure the world that her country will be able to pay off its debt.

The Ukrainian economy has been battered by the global recession, and the country has been relying on a more than $16 billion loan from the International Monetary Fund (IMF) to stay afloat. But the IMF is withholding the second installment of the loan because government officials have so far failed to present a balanced budget.

The prime minister says she will resume talks with the IMF in order to secure the funding.

Some information for this report was provided by AP, Bloomberg and Reuters.