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The interesting question is what would have happened if the USA had directely nationalized and restructured the failing banks rather than loan them money after the subprime mortgage crisis and if it had supported the economy through productive investments in infrastructure rather than lowering the Federal funds rate.

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Completely agree, and bought out all underwater mortages?! See HAMP program failure

How does nationalizing the banks help?

By allowing you to restructure them before privatizing. The crisis was a failure of gouvernance. Most of these banks were going to and should have failed.

Once it was agreed that they were too big to let the situation run its course, it would have made sense to step in and actually solve the systemic problem.

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