Is "Nationalizing" the new warm and fuzzy code word for transfer of wealth?

[Dover]

Or perhaps an efficient means of finishing off what's left of our government?

We've all become pretty savvy regarding the 'word craft' in propaganda, and how a word or phrase's true meaning can be distorted/reversed to make it palatable to the public, though it in fact means the opposite. The public is (despite the media's attempt to convince us otherwise) more left-leaning and naturually populist/nationalist in our makeup if we must label it. I prefer 'humanists' myself, or 'noncorporatists'.

So, when our 'leaders' began to use this term relative to the banking/financial sector, perhaps we felt just a little bit warm and fuzzy, seeing this as a move in the right...or should I say LEFT... direction. That the U.S. government was back in the driver's seat looking out for its people.

So let's examine this term 'nationalizing' more carefully. We are aware that many countries have begun to nationalize their resources in order to keep them from the far reaching tentacles of the Western nations who like to call their plundering, 'free markets'. For instance, Russia nationalized their greatest asset, oil/gas, by reclaiming it from the oligarchs. South America is following suit (with many of their 'oligarchs' being from the U.S). Blasphemy!

I and some other DUers began talking about nationalizing some of our renegade corporations some months back, as a temporary means for government to grab the reins again. Remember those posts?

And the next thing you know that word is being thrown around regarding the banking collapse and government intervention. We're told how much this went against the philosophical grain of Paulson and others and yet it sure seems like what we actually got was just more looting of the treasury and bankrupting of our government (as had happened over the last decade or so). That phrase "nationalizing the banks" sure seems to sooth many of us, even as we hear that the billions of dollars in bailout that began to stir a deep suspicion last Fall will soon become TRILLIONS.


So my question is, HOW are they defining that word? How does it benefit our nation as a WHOLE?

For instance, does nationilizing involve giving money to companies with no strings or accountability?
And what exactly IS the government gaining in return? Is the money instead being used to GROW even larger corporations/financial entities (disregarding current antitrust laws in the process) through more and greater mergers and consolidation? If the government 'buys up' bad assets, doesn't it become as vulnerable to collapse as the companies they 'rescued'?
Who really has the reins?

What are your thoughts?

[Cerridwen]

1. K & R while I think on this and see if I have some thoughts worth

sharing.

Good points, btw. Very good.

[Greyhound]

2. Now that we've allowed the looting of yet another $3T, it is safe to use the new "N" word.

Of course, what we'd be nationalizing at this point is the absence of assets.

Still, once we have them in name, we can keep them once we've fixed them...

Oh wait...:think:

[Warpy]

3. Nationalizing the banks, which is what economists are talking about,

means allowing those banks to stay open and functional even though they no longer have a legal asset to debt ratio. It also means stockholders in those banks are holding worthless certificates until those banks are once again passed into the private sector.

If the banks are not nationalized, there are only two options: first, continuing to pour funny money into them and increasing the national debt to shore up their asset columns and two, letting them fail, leaving stockholders and depositors high and dry until the FDIC gets around to allowing depositors to get their insured money back, something that can take years.

I think we can all pretty much agree the second option is the least attractive. Remember, banks don't do Chapter 11. They just collapse and cease to exist.

Taking things out of the private sector and into the public sector means taking things from the rich and giving them to the public. Privatization means taking things owned in common by this country's people and passing it to rich men.

[Dover]

8. Well Warpy, I think some feel that letting them go belly up IS the right option.

rather than costing the entire country trillions and taking on toxic assets that probably won't
ever recover their value.

And what do you make of the hands-off lack of accountability or trace-ability of how the money is
being spent? Or the contractual weaknesses in the agreement that leaves the government and us without a serious stake? Would anyone in their right mind make such an agreement? Or these banks using the money for further consolidation? And why are those who helped get us into this fix not sitting in a jail cell or at the very least sitting at home with a pink slip? That goes for all the corporate titans and failed captains of the Titanic who are lined up for more money?

[Warpy]

9. I favor nationalization

until such time as sound banking practices have gotten their asset to debt ratio within the legal limit. That could take months to decades, depending on how crooked their management had gotten.

Obviously, Glass Steagall needs to be reaffirmed as well as dozens of other banking regulations that kept them honest for several decades after the Depression.

I don't favor throwing more money at them and I don't favor letting them fail for the reasons I outlined above.

[ThomWV]

11. If I may step in, I think you are misunderstanding something

When we speak of nationalization of the banks we aren't talking about throwing unaccounted for dollars into the black hole that is their basket of assets. Nationalization means that the nation buys the bank. Give them whatever their current market capitalization is and tell the managers to hit the road as the auditors come in and find out what's left. From there the bank operates under strict Government supervision until such a time as its on its feet and sold back to the highest bidder.

This is a much different thing than just tossing endless bales of cash to them and wondering where it went.

[Dover]

12. So you're distinguishing it from the bailout?

Perhaps I have tangled the two.

So what is the upside for our government if they can't be made profitable?

[pnutbutr]

4. nationalization is

when the government completely takes over a business etc... It is usually done to bring revenue directly into the government. In a small amount and with proper oversight this can be a positive in some cases. Problems arise when the government becomes too dependent on the revenue or when nationalization has spread so that the government has to constantly grow in order to keep pace with the ever increasing burden of running more businesses.

IMO, nationalization only leads to problems and an unnecessary increase in government.

[leftstreet]

5. There was a time when Orwell had to make this shit up

They'll 'nationalize' the banks, inject them with our tax dollars, then hand them back over to private investors - laughing at us as we all stand around singing The New International: "Kumbaya WTF?!"

[LBJDemocrat]

13. No, fucking, shit. nt

[Deja Q]

6. Only tangents. What you describe seems not dissimilar to "protectionism".

Wrong for any single country to engage in "protectionism" when the "global economy" is concerned, right?

Hurry up college. I'll be doing the business classes sooner so I can understand all this.

[Dover]

7. Yes, this terminology is tricky, and may not be an adequate descriptor for current conditions.

We may need to invent new terms!

I think we are inevitably headed toward globalization in some form. But what that will look like, and how it will be structured is very much up in the air. Of course protectionism and/or nationalism won't ultimately work in a global world, but as a temporary measure it might be helpful. Perhaps it's time to turn inward and clean up our own house before continuing expansion right now. We need to figure out who we are before we can hope to be in a healthy relationship with a global community.
I'm no economist but I also don't want us determining our future based on purely economic considerations. It may be one catalyst for change, but economists shouldn't be the only ones on the panel discussion for redesigning the future.

Perhaps the changes that need to happen transcend our current system entirely as our changing values lead us to something entirely new, yet still not fully understood. The problem is that in such a 'vacuum' and time of upheaval and insecurity when the new hasn't fully formed, we are in the greatest danger of power grabs, false hopes and poor decisions. So, it is now that we must be the most vigilant and stop pretending that we are still in Kansas. We won't be going 'home' again (back to what we were). It can be a very creative time...creative chaos.

And I am so TIRED of the double-speak and opaqueness of government. If they do have some sense of where they want to take this country, beyond the current crisis, then they should share it rather than keeping us in the dark (for fear of our disapproval?) or there will be big trouble...

[Mike 03]

10. Plenty of Economists, including the likes of Paul Krugman, are not so terrified of this

notion.

I'm cynical and skeptical like a lot of people here, but nationalization of the banks is not and never was something that terrifies me.

Should it?

Hasn't it worked reasonably well in Europe?

Why are so many Democratic economists approving of this notion.

Bernanke emphasized in his speech today that any such endeavor would be temporary.

[Dover]

14. Interestingly enough, Charlie Rose's guests defined what is meant by 'nationalizing' the banks

tonight. He had several guests on (including Larry Summers) discussing the plan for dealing with the banks and the various remedies they'll use, one of which will be nationalization.
One guest distinguishes between good and bad nationalization, the main difference
being that the 'good' type is temporary, getting the bank back in the hands of the private sector ASAP, while the 'bad' type is the long term running of the banks by the
government. Anyway, the show will be available for viewing probably sometime on Thursday if you'd like to view it: http://www.charlierose.com/