What would happen to My Money if Citigroup or Bank of America were Nationalized

Posted on April 26, 2009
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BOA What would happen to My Money if Citigroup or Bank of America were Nationalized As a sign of the threat has the financial and economic crisis in sight, an event spread once ridiculous and very unlikely to happen. Our biggest banks are to be nationalized in the margins. True – The government will soon come and take over America's largest banks, they are expected to save in its debt obligations. But what your savings, stocks and funds in these banks are going to happen? Read on to find out.

The shares of major bank Citigroup (C) and Bank of America (BAC) reached a record low today on a genuine fear of those who (under the control of the government nationalized put), which according to the opinion of the influential Senate Banking Committee Chairman Christopher Dodd. White House Press Secretary Robert Gibbs tried to allay such fears, saying the government of President Barack Obama holds a "private" banking system is the right way to go. But he categorically refused to nationalization as perhaps in the future to exclude necessary.

Continued weakness in financial stocks underscores deepening concern that the month of the unprecedented effort by Bush and the U.S. government sufficient fence almost every corner of the U.S. banking system may not be to prevent the nationalization of most wounded several organs. Both banks are currently with the report today said that they are financially viable and is still a loan. However, a delayed response and a mix of government representatives to a sharp decline in stock prices during the day resulted, despite the modest recovery in the opinion of the White House.

However, the specter of nationalization is much more real than ever before, and you must know how to be concerned if your bank will be nationalized. Here is a breakdown:

Cash, CDs and other savings banks or subsidiaries are held: your savings are up to 250,000 to the authority of the FDIC ($ limit), as they are now protected. So, you have little to fear, since the FDIC is supported by the U.S. government. Still nice to have at least some bank accounts (Credit Union to ensure even better) that you instant access to cash, while over nationalized banks. Even if the banks nationalized, it does not mean to close it. Also like the FDIC takeover recently, the process is quite smooth, first with only a change in personnel-C level. to the passage of time, despite the closure of its branches disappeared more standardization of all bank products and reduced customer service as a competitive advantage drive.

The shares of Bank Stock (ie shareholders invested): Similar takeover of the GSEs, Freddie Mac and Fannie Mae, shareholders and preferred shareholders will be deleted. The fact that shareholders are the greatest losers in the nationalization of all is the main reason that the shares of Citigroup and Bank of America fell so sharply or today.

Exchange Traded Fund or who had invested in bank stocks: Most likely they are to take a big hit, especially if they are financially focused fund. If the cross-sector diversified fund because its impact would be less exposure to smaller financial sector. Thus, the ownership Leave your money to ensure that they are financially not very centric.

401K or IRA plan, which has invested in the bank: If you work for one of the bank and have some or all of the shares in the bank, it will be removed along with all other public shareholders. If it is to have a 401K plan money in the fund then you like all owners will be affected by other investment funds (see above) and take a match to your 401K or retirement account.

Other investors in the bank: the holders of bonds (corporate bonds by the Company to the holders of bonds, sold for money) can be protected if respecting the public debt. This will vary on the bank by bank.

Stock and customer management Wealth: banks such as Citigroup and Bank or the United States, a large brokerage and wealth management operations as well, which is not part of the central tasks of banks (savings and credit cooperatives). If the government takes over, it will probably be sold to private operators. In view of the brokerage and wealth management functions quite profitable with low risk, they will simply be sold.

International investors and customers: In the case of Citigroup, a broad international framework further complicate the U.S. government is nationalizing the system, since, with the laws in other countries, that foreign government control of domestic banks would reduce conflict. In Mexico, for example, where the control of the nation's No. 2 bank Citigroup of assets, the law limiting the government of more than 10% of domestic banks. Probably the company will be nationalized in the United States and acts as a separate unit for international destinations and eventually sold to companies in the host country.

Although the word "nationalization" has terrible connotations, it was in fact have done very effectively in the past. Sweden took over the banks during the financial crisis, and privatized them again to health and later. France nationalized the banking sector, privatization through sales to private hands and now the process can be of another wave of nationalizations. In the United States, the government took over hundreds of educational institutions in the crisis, the savings and loan back a few decades. This aggressive sale of distressed assets and is now regarded as a successful experiment.

We can only give you a different cycle, despite the nationalization, and the best thing you can do is to get information on its impact on you and take appropriate action. Hopefully this review some information.