What, Exactly, Is ‘Partial Nationalization?’

By October 14, 2008Economy

The front page of today’s Washington Post:

The Post is choosing to use a fundamentally misleading term for the federal government buying preferred stock, with no voting rights, to bolster a financial institution’s capital stock.

Nationalization means state ownership and operation of a company and its assets. Government control

The government’s purchase of shares of a bank does not place that bank under government control, at least in any degree more than already-exercised control through the governent’s regulatory authorities.

And here’s the Post’s AM story, posted online at 8:34 a.m.: “Bush Defends Bank Nationalization.” And the lead:

President George Bush said this morning that the administration’s “unprecedented and aggressive” plan to partly nationalize nine major banks was an “essential short term measure to ensure the viability ” of a battered financial system.

 

“To partly nationalize.” What does that mean? What does that mean to the reader? Other publications chose other terms:

Both vastly superior.

Venezuela nationalized its oil industry in the ’70s, and in recent years the Hugo Chavez government has taken over other foreign-owned oil companies in the country by gaining at least 60 percent stake in the business. A controlling share. In many cases, at least in Latin America, nationalization and expropriation were interchangeable terms. The U.S. action is nowhere close.

We expect there was a healthy editorial discussion in the newsroom about the most accurate terms to describe the government’s investment of $250 billion in the banks. And we can’t help but imagine that some advocates of the term wanted to use “nationalization” to point out the hypocricy of a supposedly free-market Administration supporting government investment in institutions.

In any case, the government’s action is a big, big deal. But it’s not nationalization, partly or otherwise.

(Days like this make one thankful for the Newseum and its online posting of page ones. A wonderful resource.)

UPDATE (10:14 a.m.): Looks the editorial debate is continuing, at least in the online portion of the company. The Post’s online headline for the same story that previously proclaimed “Bush Defends Bank Nationalization” is “Bush Defends Government Bank Investment.”

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  • […] Not to get cranky or anything, but isn’t it really strange that media outfits would misrepresent an admittedly major expansion of government involvement in the U.S. banking system as “nationalization?” This are times in which accuracy and discretion are critical, especially given the public’s shaken confidence. (See earlier post.) […]

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