February 18, 2009 / 5:29 PM / in 9 years

Sen. Graham says bank nationalization an option

WASHINGTON (Reuters) - Nationalization is an option for dealing with troubled U.S. banks if they fail the U.S. Treasury’s “stress test,” Sen. Lindsey Graham said on Wednesday.

The Republican from South Carolina said other options in dealing with struggling banks included simply allowing them to fail, or having the government continue to inject capital into them, but he warned the continued capitalization approach “almost ruined Japan.”

“They (the Japanese) kept throwing good money after bad. I think that is what we’ve been doing quite frankly and we need to stop that,” Graham told Reuters in a telephone interview.

If institutions are truly “zombie banks,” he said, one option for the government “would be would be go in, take the bank over, restructure it, break it up, sell it, get the money back. And you can call that nationalization if you want to.”

The U.S. Treasury is expected in coming weeks to subject up to 25 banks with assets exceeding $100 billion each to “stress tests” to decide which banks need additional capital.

“We need to keep option three (nationalization) on the table for any bank that fails the stress test,” Graham said.

Reporting by Susan Cornwell; Editing by Tim Dobbyn

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