Couric: Bank Nationalization Will Provide 'Big Dose of Confidence'

Katie Couric concluded a Thursday night look at the pros and cons of nationalizing banks by seeing the federal government as a comforting security blanket: “Nationalization may have a psychological impact as well, and Uncle Sam wrapping his arms around failing banks in this country might provide a big dose of confidence for the American consumer.”

Building to her pro-nationalization conclusion, Couric asserted that “everyone hopes to avoid what happened to Japan back in the 90s when the government pumped good money into bad banks, essentially keeping unhealthy financial institutions that weren't going to make it anyway on life support, crippling the economy” while, in contrast, “a government takeover of a bank last year” in Britain “ helped to temporarily calm fears in the financial markets there.”

Earlier in the CBS Evening News piece, Couric outlined the arguments for and against nationalization, ending with quite an understatement about the quality of government-provided customer service:

There are two sides to this coin. It could keep banks open and free up money so they can start lending again. But it could scare off private investors who will see government ownership as a sign of damaged goods, there could be more branch closings, and a government bureaucracy may not offer the best customer service.

KATIE COURIC: Today's decline on Wall Street was led by financial stocks. Investors are worried that the U.S. government may nationalize American banks. Why do that? And what impact might it have? Tonight we go beyond the headlines to look nationalization and what it means. For a lot of people on Wall Street, bank nationalization is a scary proposition.

BERT ELY, BANK ANALYST: The fear factor is what would it cost the taxpayers and what would it mean?

COURIC: What does "bank nationalization" mean? The government would take control of failing banks, putting in money to help get them back into the black. There are more than 8,000 banks in the U.S. and not all of them would be nationalized. Just the biggest ones in the most trouble. There are two sides to this coin. It could keep banks open and free up money so they can start lending again. But it could scare off private investors who will see government ownership as a sign of damaged goods, there could be more branch closings, and a government bureaucracy may not offer the best customer service.

PRESIDENT FRANKLIN ROOSEVELT: We face the future with confidence and with courage.

COURIC: During the Great Depression, instead of taking over distressed banks, President Roosevelt chose to prop them up with government funds until the economy recovered. That's what the U.S. has just done in the case of two of this country's biggest waning banks, CitiGroup, and Bank of America. Those bailout bucks saved them from the fate of financial giants Lehman Brothers and Bear Stearns. But the Fed Chairman has made it clear: If some banks are nationalized, it would be temporary.

BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE BOARD, ON WEDNESDAY: I think there's a very strong commitment on the part of the administration to try to return banks, or keep banks private or return them to private hands as quickly as possible.

COURIC: Everyone hopes to avoid what happened to Japan back in the 90s when the government pumped good money into bad banks, essentially keeping unhealthy financial institutions that weren't going to make it anyway on life support, crippling the economy.

ELY: It was called the lost decade.

COURIC: But in Britain a government takeover of a bank last year helped to temporarily calm fears in the financial markets there. Nationalization may have a psychological impact as well, and Uncle Sam wrapping his arms around failing banks in this country might provide a big dose of confidence for the American consumer.