Failed banks should be nationalized

Given what has to be negative market value, it's not as if the shareholders/bondholders can legitimately expect compensation. One can argue that, in some cases that would wipe out small stockholders (who are involved via mutual funds) and pension funds, however it seems that one could have a compensation provision that functions like an FDIC guarantee, allowing some coverage for mutual funds and 401(k)s while still subjecting corporate owners and large individual holdings to the full consequences of market risk.

Thus, the taxpayer wouldn't be out an inflated amount for the toxic assets. Consequently, the latter could remain in govt. control until values revive while the rest could be reprivatized. If necessary, this could involve breaking up larger entities into units that aren't "too big to fail".

Since nationalization increases the long-term costs of capital (because of the perception of increased risk), it should only be applied to those companies that have definitely gone bust.