Good-bye, privatization; hello, nationalization
Quick, what's the difference between taking over a bank and nationalizing it?
About 13 points – or so I read in Time magazine. Its latest issue cites a Gallup/USA Today poll finding that 57 percent of the American public oppose "temporarily nationalizing US banks." Only 44 percent, however, oppose "temporarily taking [a bank] over."
What a difference a word makes. Take over is one of those phrasal verbs, so common in English, that sound concrete and user-friendly but whose meanings are less than clear. We understand what's meant if one friend observes of another, "He really took over the conversation at dinner last night." But just what does "taking over a bank" entail? It's not certain, other than that, should the feds take over one of the really big ones, some would want to be sure the US Treasury had a seat on the Executive Office Redecorating Committee.
Nationalize, on the other hand, with all its syllables and its "ize" ending, sounds like something Mussolini would do. It is something he did, in fact. The Italian government took over a number of ailing firms in the 1930s, among them carmaker Alfa Romeo. But Il Duce was not the only one in this game. The early 20th century was full of nationalizations of large companies, notably railroads.
Then after World War II, communist governments nationalized private companies in droves, virtually across the board in some cases. It wasn't only communists, though; the French nationalized major banks – and a number of other big companies as well – during this period.
And in 1956, the Egyptian government nationalized the Suez Canal, closing it to shipping for a time and buying out shareholders of the Suez Canal Co., the private entity that had been running it. It was a clear sign of a shifting balance of power between the European colonial powers and the countries we now refer to as the developing world.
The counterpart to nationalization is privatization. Remember when that was the big buzzword? Enormous initial public offerings, notably of phone-company stocks, in places like Britain, Japan, and Germany not only helped bring about the telecommunications revolution of the late 20th century but helped create equity investors out of millions who would otherwise never have ventured to own stocks.
If privatization is a word drenched in eau de Reagan and parfum Thatcherite, nationalization has about it more than a whiff of stale smoke. The visuals it suggests are the grainy black-and-white of newsreel footage. It is a word from an era gone by – or so I would have suggested until maybe six weeks ago.
Legislation has been introduced to give the Federal Deposit Insurance Corporation a credit line at the US Treasury worth half a trillion dollars. Speculation abounds that the FDIC is getting ready to go after some really big institutions, not just the Anytown Community Bank.
Sen. Lindsey Graham (R) of South Carolina is one of a handful of Republicans saying that nationalization shouldn't be off the table.
A few weeks ago, bank stock prices tumbled after Sen. Christopher Dodd (D) of Connecticut used the "n" word to refer to what might happen to some major US banks. Prices recovered somewhat after some damage control from the White House. And a few days later, Federal Reserve Chairman Ben Bernanke told Congress, "We don't plan anything like" a full-scale nationalization that wipes out stockholders. But the real surprise to me in the Gallup finding is that it's only 57 percent who oppose temporary nationalization, whatever they think it means.
