Even Republicans may back U.S. bank nationalization

By Daniel Trotta

NEW YORK (Reuters) - In a sign of how deeply the financial crisis has transformed America, Republicans who embrace the sanctity of free markets are supporting some form of a U.S. government takeover of increasingly insolvent banks.

Alan Greenspan may have given Republicans the political cover they need to consider nationalizing U.S. banks when the former Federal Reserve chairman joined a growing list of experts who suggest nationalization is inevitable.

Opinion-makers are looking to Britain, Germany and Sweden for models of how to swiftly shore up banks whose negative net worth threatens to exacerbate a recession featuring 7.6 percent unemployment -- the highest rate since 1992.

"It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring," Greenspan told the Financial Times in comments published on Wednesday.

"I understand that once in a hundred years this is what you do," said Greenspan, a champion of free markets who is revered by many influential Republicans.

Republicans typically stand for small government and deregulation, but ideology has a way of being put aside in a crisis. Greenspan has acknowledged he was wrong to oppose some forms of market regulation.

If President Barack Obama, a Democrat, is inclined to nationalize the banks -- and the bank rescue plan outlined by Treasury Secretary Timothy Geithner leaves that question unanswered -- he may need greater support than the opposition party has shown so far in his young presidency.

None of the Republicans in the House of Representatives and only three in the Senate supported the $787 billion (553 billion pounds) economic stimulus plan Obama signed into law on Tuesday.