Within a few days, the UK government will announce its very own bank bailout. New Labour are preparing a capital injection that will see the government take up an equity stake in several high street banks.
The ironies pile up. In the mid 1990s, Labour, the old party of nationalization, rejected state ownership in order to become electable. It "embraced the market", and began a 12 year love fest with finance. However, finance betrayed Labour, and created the greatest financial crisis in a century. Like a lover rejected by his mistress, Labour reluctantly returns to his statist wife and begs to be forgiven.
The banks have also supplied their own ironies. Several are shamelessly queuing up for state ownership. Apparently, the Royal Bank of Scotland would "welcome" state funds. Other banks are just as keen.
However, a partial nationalisation is not the answer to this crisis. It is a bailout of undeserving bank shareholders and their irresponsible managers. Just watch what happens when the government announces the plan. Bank share prices will rocket, giving a windfall gain. However, that gain should rightfully and fully belong to the taxpayer, whose hard cash is saving these hapless banks.
This is why the government should only consider complete nationalisation. Wipe out the shareholders, fire the management, recapitalise the banks and then privatize them. This is the only way to secure the financial interests of the much abused UK taxpayer.