Nationalising banks: Who loses?

Bernard Hickey's "Top Ten Links" Friday included a link to a commentary by Robert Gottliebsen, reporting ANZ Bank CEO, Mike Smith, as calling for the nationalisation of troubled banks in the US and UK.

As well as the obvious motivation so see stability restored to global banking and finance, there may also a desire on Smith's part, as ANZ Bank CEO, to secure the repayment of debt owed to ANZ Bank by any of the insolvent banks he refers to, or their subsidiaries. He may also want to see these banks operating securely to avoid them calling in funds loaned to the ANZ.

But what does nationialisation mean - especially of the existing shareholders get nothing? Who are the existing shareholders?

I'm guessing institutional investors making bets with people's retirement money would represent a big chunk of ownership in the world's major banks. Or did until recently. Maybe they have cut their losses and fled. Or maybe they just moved banking stocks from the "low risk" category to the more risky "dynamic" category. Or maybe the "insane" category.

In any nationalisation process, some thought should be given to whether or not it makes sense to allow exposed pension funds of millions to be trashed entirely. These are the same taxpayers who, in the US and the UK in particular, are expected to fund the bailouts.

Any way you look at this, the blameless people who lost no one anything stand to lost a lot - or everything. Meanwhile the family trusts of the people who forgot about risk and embraced CDS and CDO junk will retire to enjoy their millions and billions.

Something not right there. I'm all in favour of sorting out the banks, but let's understand what that really means for these anonymous "shareholders".