Senator Dodd Says Temporary Bank Nationalization Possible

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The U.S. may have to temporarily nationalize certain banks, Senate Banking Committee Chairman Christopher Dodd said Friday in an interview on Bloomberg Television.

The headlines sent shares of Citigroup and Bank of America down more than 20% on fear they could be involved in any such nationalization plan.

"I don't welcome that at all, but I could see how it's possible it may happen," he said on the Bloomberg Television's Political Capital with Al Hunt, which will be broadcast later on Friday. "I'm concerned that we may end up having to do that, at least for a short time."

Dodd did say that the Obama Administration is doing what it can to avoid such action.

Bank of America shares were down around 20% to a 52-week low of $3.11 a share, while Citigroup Inc. shares plummeted more than 24% to $1.90, also a 52-week low.

Shortly after the release of Dodd's comments, Bank of America issued a statement saying, "We see no reason to nationalize a bank that is profitable, well capitalized and actively lending".

Also in that interview, Dodd said Treasury Secretary Timothy Geithner "has leeway" in how he administers the caps on executive pay, which have been imposed by the government.

By Stephen Huebl and edited by Megan Ainscow
©CEP News Ltd. 2009