As Mr. Calomiris argues, the evidence is overwhelmingly stacked against state-banks. They have lower profitability, higher NPLs, are less efficient, and have larger government securities portfolios. They have also been used as political instruments and their presence is associated with crises. However, a priori state banks can still have beneficial effects. Theoretically speaking, they can help kick-start (basic) markets, address enforcement problems and other market failures, increase access, behave counter-cyclically, etc. There are certainly success stories such as Chile's BancoEstado and the South Africa Development Bank (Heinz Rudolph (2010)). And as Mr. Franklin pointed out, evidence also suggests state banks have expanded during the crisis which has surely helped credit-starved but otherwise productive companies in both developed and developing countries. Additionally, state banks can also fulfill key government finance and employment mandates (although this is not necessarily desirable in the long run) and help mobilize savings in early stages of financial development because the public perceives them as being backed by the state. This can also be stabilizing during a crisis. There are also a few technical/empirical points that could be relevant to the performance debate: * My reading of the empirical evidence is that the poor performance is mostly driven by developing countries in the sample. I thought the case against state banks is empirically less clear in developed countries (although the effects of politically motivated lending in developed countries are now pretty clear...). This finding suggests governance and institutional issues play a large role. *Additionally, I believe it is Levy-Yeyati, Micco, and Panizza (2007) that revists the seminal La Porta, Lopez-de-Silanes and Shleifer (2000) paper with more data and an instrumental variables approach. If I recall correctly, they find that state ownership is no longer significantly associated with financial development and/or economic growth. *Another important point in this discussion is that although state-banks have broader mandates than commercial banks, they are held to the same performance standard in many parts of the literature (i.e. analysis of ROE, ROA, etc.). However, this evaluation approach omits any beneficial effects state banks might have as regards their development mandates putting state banks at a potential disadvantage. In fact, one could even argue that state banks should have lower profitability, etc. if they are carrying out their development mandates correctly. So taken together, I think government ownership is not inherently bad, since there are success stories. Rather, the evidence suggests that poor mandates, subpar supervision, opaque governance, weak institutions, etc. are driving factors behind the sobering performance of many state banks. In other words, there is a cost-benefit trade off. Some got it right, but many didn't.