The calls for the government to take urgent and clarifying action on Citigroup are growing louder by the blogpost, and coming from pretty much all sectors of the commentariat. As the Opinionator noted yesterday, the Wall Street Journal has endorsed the idea, telling Obama to “get on with it.”

Inject another round of public capital if need be, but also replace the board and the management. Give the new managers a mandate to sell Citi’s various parts, many of which are viable, profitable businesses. Declare publicly that this is merely a temporary process and that the Treasury’s goal is to restore Citi to a healthy (albeit smaller) private bank as rapidly as possible.



That’s pretty much the message that others are sending, in apparent hope that someone in the Obama administration remembers that whole “fierce urgency of now” idea and applies it to Citigroup.

Jeff Matthews for one has grown impatient with administration and Fed officials talking up the risks of nationalization. In a post entitled “Zombies Must Die,” he takes issue with Ben Bernake’s statement last week that the nationalization of Citigroup would harm the company’s “franchise value” — other businesses, unsure of the bank’s future, would be reluctant to work with it:

The notion that Citigroup and any other zombie bank could be less badly run under a Government shareholder than they have been under ownership by the Fidelitys and Vanguards of the world, is hard to fathom. Bernanke’s concern that the “franchise value” of the Balkan Empire that is CitiSmorgasbord would somehow be lost seems to us the figment of a fevered imagination clouded by too many white papers. So why not get it over with already? Wipe out the shareholders whose job it was to hire managers to run the business effectively, and preserve for the taxpayers whatever potential upside might come as owner, rather than merely absorbing all the downside as lender-of-last-resort.

At the Big Picture, Barry Ritholtz says the problem may be that the word nationalization is “fearful and loaded,” and suggests moving “beyond the N word.”

Why don’t we call it by a more accurate, precise, and less scary name: FDIC mandated, pre-packaged Chapter 11, government funded reorganization. That is an accurate description of what occurred with Washington Mutual (WAMU) now part of JPM Chase, and Wachovia, now part of Wells Fargo. The Feds step in, seamlessly transfer control of the assets to a new owner, while simultaneously wiping out the debt, the shareholders, and giving a huge haircut to the bondholders. Let’s look at each of these in turn: • FDIC mandated: What does that mean? Well, by law, the FDIC is required to handle the liquidation or reorgs of insolvent banking institutions. We have prevented that normal process thru the application of trillions of dollars in bailout monies; • pre-packaged The entire process is mapped out in advance so as to make it fast and seamless. WAMU depositors did not notice a single change over the weekend their FDIC mandated, pre-packaged Chapter 11 workout, government funded reorganizatio occured. The only observable difference was that WAMU customers were no longer charged an ATM fee when they went to Chase ATMs, as it was now the same company; • Chapter 11 The full bankruptcy protection applies — meaning employees still get paid, secured creditors do not suffer, and debtor in possession financing (DiP) is available to the bank; • government funded The source of the DiP funding; • reorganization Just what it sounds like — new board of directors, management transitions out to a new team, recaptalized, bad debt taken off of the books, toxic assets spun out.

At Bloomberg, David Reilly says that “the nationalization debate is a smoke screen. We’ve already nationalized the big banks. Let’s just accept it and move on.”

Once that happens, the government can give investors clarity on whether nationalization will do more than dilute shareholders’ common stock. It can stop wasting time trying to fashion support mechanisms that don’t give the appearance of ownership. And it can get about the business of forcing weak banks into the hands of the strong, or the Federal Deposit Insurance Corp. Instead, the government is trying to craft a plan that “uses nationalization to prevent nationalization,” according to a research note Tuesday from Christopher Low, chief economist at FTN Financial. In other words, the government, if it has to take common equity in banks, wants to avoid owning more than 50 percent so it can sidestep claims of nationalization.

At Clusterstock, Henry Blodget concurs:

One of the big flaws of the current approach to the crisis, in fact, is that the government is already quasi-managing the banks (see Citi), while insisting that it not actually taking them over. . . . The current situation is as unsustainable and damaging as long-term government ownership. If “nationalization” becomes a multi-year workout process in which government bureaucrats determine which kind of toilet paper Citigroup should buy, “nationalization” will fail, too. So what we’re really pleading for is fast, tough decision-making that forces the banks to acknowledge reality (asset writedowns), rebuilds their balance sheets (debt to equity conversion and, possibly, new capital), and then puts them immediately back in private hands.

Not that everyone out there has signed up for nationalization. At Ace of Spades HQ, Russ form Winterset recommends this video clip in which Jim Cramer compares bank nationalization to a “disastrous Civil War battle”:

I’m not a big fan of Cramer’s “Mad Money” show. It’s “Financial Porn” that I rarely watch; HOWEVER, I happened to be channel surfing last night when I caught a snippet of his show that absolutely floored me with it’s insight. It’s a long clip (12 minutes), but it’s pretty good stuff.

Indeed it is. It may not equal Santelli’s cri de Tea Party, but it’s vintage Cramer.