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Nationalise Hypo Real Estate? What is permissible?

Author

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  • Karl-Theodor Freiherr zu Guttenberg
  • Manfred Weber
  • Otto Bernhard
  • Paul Stephan
  • Klaus Fleischer

Abstract

At the beginning of April 2009, the Bundesrat approved the so-called Rescue Takeover Act, which made a time-limited expropriation of a system-relevant bank possible. Is such a step permissible? Karl-Theodor Freiherr zu Guttenberg, Federal Minister for Economics and Technology, explains the restructuring administration model presented by his ministry that gives the "state a crisis instrument in line with market requirements that allows it to support a system-relevant bank that is below the expropriation threshold without sending out harmful signals to taxpayers, investors and managers". Manfred Weber, Federal Association's of German Banks, stresses that in the present systemic financial crisis there is no alternative to determined government action to guarantee the stability of the financial system. The success of the stabilisation measures must also be backed up by state takeovers in well-justified individual cases, such as Hypo Real Estate. Otto Bernhardt, member of the CDU/CSU parliamentary party in the German Bundestag, points out that expropriation is possible according to the economic-policy neutral German constitution and also the German economic order but should nevertheless be avoided even though it cannot be completely ruled out. For Stephan Paul, Bochum University, the nationalisation of a bank is necessary as a last resort, but he points to the economically wrong incentives that may be associated with this measure. In future it will be necessary, instead of a time-limited intervention born out of need, to find a permanent regulation that should be imbedded into an overall concept of bank rescuing. One element of this concept should be an insolvency procedure appropriate for financial institutions. Klaus Fleischer, Munich University for Applied Sciences, is of the opinion that the takeover of HRE should be seen as "a limited guest performance that should proceed undramatically".

Suggested Citation

  • Karl-Theodor Freiherr zu Guttenberg & Manfred Weber & Otto Bernhard & Paul Stephan & Klaus Fleischer, 2009. "Nationalise Hypo Real Estate? What is permissible?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 62(09), pages 03-17, May.
    • Handle: RePEc:ces:ifosdt:v:62:y:2009:i:09:p:03-17
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    References listed on IDEAS

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    1. Mathias Dewatripont & Jean Tirole, 1994. "The prudential regulation of banks," ULB Institutional Repository 2013/9539, ULB -- Universite Libre de Bruxelles.
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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