What should be done with the nationalised banks?

[Kristina Burns]

Should the UK and US governments seek to re-privatise the recently nationalised banks and insurers as soon as possible, or is there a role for the state to retain a long-term shareholding interest in commercial banks and other institutions engaged in long-term lending? Does a private-enterprise economy ultimately require ongoing direct state involvement in the provision of financial services?

[ChrisJCook]

When we say "Private" we actually mean "owned by a joint stock limited liability company" .

Once you realise that there are in fact other mechanisms, based upon trust and partnership law, rather than company law, then new policy options open up for a middle ground between conventional  "public" and private"

For instance, a Bank's assets and liabilities could be transferred to a "Custodian"  - which may or may not be the State, but would certainly operate in the Public interest.

Shares in the Bank "shell" could then be transferred in trust to the staff to create a John Lewis-style employee Co-operative who would become a "Managing Partner".

This "Managing Partner" would then share proportionally in the gross revenues  with a "Capital Partner" consisting of an investor cooperative of former shareholders and the government (or other new investors), who themselves share revenues proportionally. Losses from defaults would then be shared proportionally.

Such "Capital Partnerships", using a UK Limited Liability Partnership (LLP) as a framework, already exist > £1bn. And the City of Glasgow already has four municipal LLP's, albeit conventionally funded.