German bank nationalization an attempt to reestablish control over monetary policy Commentary
German bank nationalization an attempt to reestablish control over monetary policy
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William L. Richards, Jr., SJD [Attorney, International Financial Law]: "The legislative effort to nationalize designated German financial institutions has triggered terminology of expropriation of shareholder interest. Perhaps it is a better characterization to suggest this is our first glimmer into the concepts that economists, bankers, and academics have tussled with for sometime now. Who is the lender of last resort and how will it be implemented?

It is the first encounter of the International Monetary System with the expansion of global financial integration. World economies from the emerging to the more developed have reaped the rewards that it provides. Sophisticated economies have had tools at their beck and call in the past that enabled them to maintain nimbleness. Could this be a first fracture in the European Community unification and the inability of autonomy to meld with individual public policy and financial solutions?

No country since World War II has proven themselves to be more fiscally responsible than Germany. The unification of East Germany with West German has been a most admirable accomplishment. Financial institutions are regulated and supervised, but the financial backlash of the present global de-leveraging has occasioned what appears from this historic development to be a hedge against systemic insolvency. That is what the role of the lender of last resort is to be, a stop gap for precisely that.

The key to handling economic crisis is the ability to have a hands on command of a nation's currency and its coordination with its various public policies. To legislate conversion of financial institutions in nationalization does not necessarily imply an expropriation, but rather quite a bold and responsible act of a government hobbled by its loss of direct ability to control its currency and monetary policy."

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