Monday, March 02, 2009

If This Is Bank Nationalization, It’s Not What Marx Meant

By Stuart Rothenberg

Much of the talk about “nationalizing” our country’s banks borders on the ridiculous, with journalists and television celebrities more interested in getting attention than in explaining what is going on or might develop.

If you watch Sean Hannity on Fox News, you probably now believe that the United States had taken a dramatic turn toward socialism and the Obama administration is about to embark on a plan to eliminate the private sector. That’s hogwash.

Socialism involves an economic system defined by state ownership of the means of production, not a brief government investment in a failing bank with the full intention of returning the bank to profitability and a return to private ownership.

Unfortunately, too many in the media have been throwing around the term “nationalization.”

For some, it’s an effort to frighten viewers and rally conservatives for whom the word nationalization evokes images of Latin American leftists or the Soviet Union. For others, I suspect, use of the term is merely the latest example of the national media’s reliance on hype and hyperbole, whether to attract viewers or inflate the importance of the latest topic du jour.

While some elected officials, including a Republican or two, have employed the term nationalization, most wisely have not. Most Democrats, including those at the White House, have run as far and as fast from “nationalization” of the banking industry as they possibly can.

And those who do raise the prospect of the government increasing its role in the industry (usually by investing in a troubled bank and taking back either preferred or common stock) talk about only those banks in the worst shape, not the entire industry and not permanently.

I did a search of available transcripts on LexisNexis to see how various television programs and major newspapers discussed potential additional U.S. government investment in selected banks (which could ultimately lead to government ownership and control of some of those banks), and discovered some considerable differences in coverage.

The worst coverage, not surprisingly, came from non-journalists on TV: Glenn Beck on Fox and Jack Cafferty on CNN. (I found no transcripts from “O’Reilly Factor” or Hannity on Fox or the liberal shows on MSNBC, so I can thankfully ignore them for the moment.)

Beck’s show on Feb. 16 threw “nationalization” and “socialism” around without caution or definition, making no distinction between weak banks such as Citibank and Bank of America and stronger banks such as JPMorgan Chase.

“I’m concerned about a couple of things of the nationalization of banks. ... Is anybody bothered that the United States government will be controlling all of our finances?” Beck asked, choosing to paint with a fire hose rather than a brush.

Cafferty poses questions to viewers on the “Situation Room,” and on Feb. 18 his question was, “Is it time for the U.S. to nationalize its banks?”

No modifiers. No distinctions between banks that have value (and therefore presumably would require compensation to stockholders if they were expropriated by the federal government) and those that are insolvent.

At the other extreme of the coverage were two programs on public (“nationalized”?) TV, “The Charlie Rose Show” and “The NewsHour with Jim Lehrer.”

Rose’s show of Feb. 18 was a model of thoughtfulness and context. On that program, Columbia Business School economist Frederic Mishkin distinguished between “bad nationalization,” which he argued involves government owning and running banking institutions, and “good nationalization,” which involves distinguishing “institutions that have enough capital” to prosper from those that “are just not viable.” Good nationalization requires selling off the assets of the bad banks before getting them “into private hands as quickly as you possibly can,” he said.

Most of the show transcripts I found that dealt with the banking crisis fell somewhere between the two extremes.

On Feb. 20 on MSNBC’s “1600 Pennsylvania Avenue,” host David Shuster commented about “this potential bank nationalization,” but NBC News Chief White House Correspondent Chuck Todd ended the back-and-forth by wisely pointing out that “the entire banking system is not going to be nationalized.”

PBS’ “Nightly Business Report,” NBC’s “Meet the Press” and to a lesser extent ABC’s “This Week” talked about “nationalization,” but eventually made distinctions that instigators like Beck didn’t.

Still, if you watch cable TV periodically throughout the day, I’m quite certain you’ll find many examples of hosts and guests tossing around nationalization without any context or distinctions.

Even newspapers are not immune to the hype.

Tuesday’s Washington Post used “Nationalization” in the sub-headline of a page 1 story and in the headline on the jump, though the article itself noted repeatedly that this was only a possibility and that Treasury Secretary Timothy Geithner didn’t want the government “in charge of running banks.”

Thankfully, a brief but terrific sidebar in yesterday’s Post business section addressed the idea of nationalization in a thoughtful, intelligent way, noting that the term means different things to different people.

The federal government may have to rescue a bank, or even several banks, and this may or may not mean taking common stock and a controlling interest in that bank or banks. Even if that happens, it’s unlikely that the government would seek to run those banks, and there is no sign that the Obama administration fundamentally favors the public ownership of banks or the banking industry.

Call that whatever you wish: nationalization, government investment, short-term public ownership or whatever. Maybe it’s good and maybe it’s bad. But it’s a far cry from the hysteria that some are trying to spread or to capitalize on, and it’s not at all what Karl Marx or Che Guevara hoped for.

This column first appeared in Roll Call on February 26, 2009. 2009 © Roll Call Inc. All rights reserved. Reprinted with permission.