.  Alan Greenspan, the high priest of laisser-faire capitalism and an “honorary adviser” to Gordon Brown, told the FT that seizing banks was a least worst option.

“It may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring,” he said. “I understand that once in a hundred years this is what you do.”

This point is particularly relevant for the UK.

Nationalisations would “allow the government to transfer toxic assets to a bad bank without the problem of how to price them”.

Even Republicans are having a change of heart. Lindsay Graham, the senator from South Carolina, warns that keeping comatose banks on government life-support may compound the problem.

“You should not get caught up on a word [nationalisation],” he told the Financial Times in an interview. “I would argue that we cannot be ideologically a little bit pregnant. It doesn’t matter what you call it, but we can’t keep on funding these zombie banks [without gaining public control]. That’s what the Japanese did.”

February 18, 2009 10:45am in Treasury | Comment