A bank that loses access to capital eventually fails. Certainly in a current account deficit country if it loses access to intermediate funding it fails - and intermediate funders are not that keen if the bank has no access to capital.
If private shareholders feel that government will ride roughshod over their rights then there will be no private shareholders. They will have "fear of government".
So there must be a process which respects the capital that private shareholders offer - and which is seen to honour that capital.
If done that way - and the Scandinavian countries groped towards such a solution, then nationalisation is NOT contagious.
As noted in my last post Svenska Handelsbanken did not surrender ANY equity to the government even though it took government liquidity support. It was seen to have capital and the shareholder capital was respected.
There was - and the histories referred to in my last post - a contagion until the due process was implemented an no contagion afterwards.
I have no objection at all to nationalisation - but it must be accompanied by a process that both respects and is seen to respect existing capital holders.
Can we please get this straight? Contagious nationalisation - and that is where Willem Buiter et al are heading - is a disaster. It is also an simply not necessary.
PS. Notwithstanding the above - a pretty-close-to-complete nationalisation will probably happen in the UK. Due process will lead us there.