Don’t Worry, Be Nationalized — Bank Nationalization Goes Mainstream

DALLAS, Texas It’s now official.

The idea to nationalize the major U.S. banks has gone mainstream.

How do we know?

The discussion on ABC’s “This Week” with George Stephanopoulos last week revolved around not whether nationalization had merit as a way to clean up the nation’s financial mess, but whether the federal government’s seizure of these banks should be called “nationalization” in the first place.

“Nationalization somehow makes people more anxious,” stressed Business Week columnist Suzy Welch.

“So do it, but call it something else?” asked Stephanopoulos.

In the context of a wider economic program, yes, she replied.

Nobel Prize winning economist Paul Krugman took a page from the finance blog Calculated Risk by offering the phrase “pre-privatization” in place of the anxiety-ridden word “nationalization.”

Conservative columnist George Will sat there beside himself among the other three panelists.

“With credit now treated essentially as a public utility, the difference between what we have and what nationalization would be is marginal. One number: the market capitalization of Bank of America is $19 billion. Since October they have received $45 billion in public funds. So what’s the difference?” he asked flippantly.

Indeed, Speaker of the House Nancy Pelosi told reporters later in the week that the government’s role in aiding the banks is merely “semantics.”

The banking system is so bad (its assets are less than its liabilities) that the far right has also voiced the need to nationalize the banks at least temporarily.

Former Federal Reserve Chairman Alan Greenspan recently told The Financial Times that nationalization was perhaps the “least bad” option.

“I understand that once in a hundred years this is what you do,” said the so-called “Maestro.”

Republican Sen. Lindsey Graham of South Carolina struck back at critics scoffing his view of the government taking majority ownership in the major banks.

“The truth is we’ve put more money into the Bank of America than it’s worth,” he told The Charlotte Observer earlier this month. “That’s not nationalization. That’s just stupid.”

Graham continued, “It’s not responsible to take options off the table that might work. I never suggested that the government take over every bank in America. I did say it might be better in some cases to take over a bank and restructure it.”

Ah, but the “nationalization” process is taking place as we speak. In fact, Krugman called the process “as American as apple pie.”

“We have nationalized 14 banks already this year. We don’t call it that but there were 14 banks, two a week, that the FDIC seized because they didn’t have enough assets to pay their depositors. The Federal Deposit Insurance Corporation says, ‘Ok, we are taking over. We are cleaning out the stockholders.’ We are going to do exactly, what Nouriel [Roubini] said, we should be doing for some major banks. So actually nationalization properly understood is as American as apple pie,” said Krugman on Stephanopoulos’ show.

Let’s replay that quote again.