The United States has learned its historical lessons and will avoid going down the path of the depression-deepening Smoot-Hawley and protectionism as it counters the current recession. Surely it has.

But given the new global economy, more integrated and competitive than in the 1930s, the United States is not the sole determiner of economic policies. Maybe this time around, it’s China that makes the mistake of enacting its version of Smoot-Hawley, a foolish, domestically targeted policy that sparks a trade war.

From Reuters, “Yuan drop extremely disturbing“:

WASHINGTON, Dec 4 (Reuters) - A sudden drop this week in the value of the Chinese yuan <CNY=CFXS> could reignite political tensions over the huge U.S. trade deficit with China, U.S. business groups said on Thursday.

“This is extremely disturbing,” Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers, told Reuters as U.S. Treasury Secretary Henry Paulson and other senior Bush administration officials were in Beijing for high-level economic talks.

The yuan’s drop came just days before that meeting and just a little more than one month before President-elect Barack Obama takes over in the White House.

This news comes just as the fifth U.S.-China Strategic Economic Dialogue wrapped up. Secretary Paulson did not address the issue in his formal closing remarks, saying later that China remains “committed” to continued appreciation of the currency. And trade is not ONLY currency.

From Paulson’s closing statement:

As in the past, we discussed the importance of domestic-led growth, and the importance of a market-determined currency in promoting balanced growth in China that will contribute to a healthy global economy. I welcome the steps announced by the Chinese to further open their financial markets, such as allowing foreign banks to trade bonds on the same terms as Chinese banks. Strong financial markets will enable healthy economic development across China.

What we pick up riding the range…

Associated Press, “Democrats at work to tap bailout for automakers”

Detroit News, “Dems push $25B for Big 3, fed equity stake — Auto CEOs, UAW chief to testify next week; Bush opposes tapping $700B bailout fund”

Washington Post, “Showdown Begins Over Lifeline to Automakers — White House Opposes Use Of Financial Rescue Funds“:

The Bush administration signaled yesterday that it would reject a proposal by congressional Democrats to immediately advance $25 billion in government loans to ailing Detroit automakers.

The White House and Treasury Secretary Henry M. Paulson Jr. made clear that while they are open to helping the auto industry, they are strongly opposed to Democrats’ plans to carve cash out of the government’s $700 billion financial rescue program. Despite those warnings, Rep. Barney Frank (D-Mass.) said he would move ahead and draft legislation, setting up a final showdown with the Bush administration.

Lots of “showdown” rhetoric there. Well, since Dodge is a prominent domestic auto brand…

Chairman Frank’s has scheduled his portion of the policy duel at the House Financial Services Committee hearing next Wednesday, November 19, “Stabilizing the Financial Condition of the American Automobile Industry.” Details — which are scanty right now — here.

In our continuing campaign against the use, and especially the Washington Post’s use, of the inaccurate and inflammatory term “nationalize” to describe the U.S. government’s purchase of $250 billion in preferred bank stock, we report progress! In today’s Post, two legit uses.

Op-ed columnnist David Ignatius refers to global developments as “quasi-nationalization” in  “A Bailout Beijing Would Cheer“:

Free-market partisans in the West were shocked by the Chinese intervention and decried it as a dangerous precedent. But it helped stabilize the Hong Kong market. Now, that earlier bailout seems modest indeed — compared with the quasi-nationalization of the world’s leading banks we’re seeing this week.

Fair enough, and especially in an opinion column. The other mention is in a story about UBS’s difficulties, reporter Howard Schneider writes in “Swiss National Bank Takes $60B in Toxic UBS Assets“:

Swiss authorities moved to stabilize their storied banking system today, agreeing to move $60 billion in troubled assets from the books of financial giant UBS and into a special government-backed fund.

The Swiss government also invested $5 billion of public money into the bank, a reversal for a country that had taken a more hands off approach even as its European neighbors moved to shore up or even nationalize their financial institutions.

Accurate and fair.

Now, it’s possible the news has simply moved on and the bad newswriting featuring the term “nationalization” will return. But it’s also possible the editors and reporters acknowledged that the purchase of up to 3 percent of a bank’s assets does not equal government control and ownership, i.e., nationalization.

Seems like Treasury Secretary Paulson is also making the point, as reported in Bloomberg:

“The steps we’ve taken are absolutely the right steps, they’re bold steps, they’re strong steps to stabilize the financial markets and inject confidence into the banking system as well as capital,” Paulson said in an interview on CNBC television tonight. “I’m very confident that the moves we’ve taken will do just that.”

Paulson defended his proposal as “anything but” a nationalization of the country’s banking industry. He also distanced his effort from a U.K. plan to set aside as much as 50 billion pounds for equity stakes in the banks, provide 250 billion in interbank loan guarantees and 200 billion in a special liquidity program.

“What we’re doing is very different than what the British are doing,” he said.

Thank you, Mr. Secretary.

Larry Kudlow’s CNBC interview with Secretary Paulson is here.

As documented in posts here and here yesterday, The Washington Post has called the Administration’s decision to invest $250 billion in banks “nationalization” and said the act represented a move “to partly nationlize.”

It’s an inaccurate and inflammatory terminology. Here in the United States, nationalization means a government takeover, control, ownership.

In today’s Post,  Dana Milbank uses the term, but he’s a columnist who specializes in political mockery, so who cares?  A front of the business section story also mentions nationalization, but only to describe Secretary Paulson’s objections to the appearances of nationalization. Harold Meyerson, a left-wing, anti-business Post columnist writes that “the most right-wing administration in modern American history [is] scurrying to nationalize the banks.” But Meyerson is a predictable scold and Bush detractor, so again, who cares?

Meanwhile, the editorialists and business writer Steven Pearlstein eschewed the term. All in all, seems like editors are doing their job. Except on Page A6, written early in the day by political reporter Dan Eggen, “Signaling a Shift to Europe’s Path“:

In announcing plans to partly nationalize nine major banks yesterday, President Bush found himself in the unusual position of having to reassure Americans that he was not, in fact, opposed to capitalism.

That’s just flat-out WRONG.

Treasury describes the capital purchase program here.

Under the program, Treasury will purchase up to $250 billion of senior preferred shares on standardized terms as described in the program’s term sheet. The program will be available to qualifying U.S. controlled banks, savings associations, and certain bank and savings and loan holding companies engaged only in financial activities that elect to participate before 5:00 pm (EDT) on November 14, 2008. Treasury will determine eligibility and allocations for interested parties after consultation with the appropriate federal banking agency.

The minimum subscription amount available to a participating institution is 1 percent of risk-weighted assets. The maximum subscription amount is the lesser of $25 billion or 3 percent of risk-weighted assets.

That’s not nationalizing. It’s not partly nationalizing. It’s the government buying shares in a bank in order to boost their capital, a major and even history-making policy and regulatory step, to be sure. But calling it partial nationalization does the reader a disservice.

Are we being too cranky? Too paranoid? Too distracted by trivia? Too amused by emulating a Soviet-era Kreminologist poring over the lines of Izvetsia?

Don’t think so. As Meyerson’s column demonstrates, the use of the term “nationalization” to describe the Administration’s actions is an element of a political attack.  A mulitprong attack, perhaps:

• “Lousy plutocrats. They don’t believe in capitalism, just in lining their own pockets. We ought to really stick it to them. The caps on executive compensation are good, but next ….”
• “Hey, we’ve already nationalized the banks. Why stop there?”

Ultimately, the most important reason the term should be dropped from the lexicon of serious, fair-minded journalists is because it misleads and misinforms the reader about an important matter during a time when markets and public confidence are fraying. Accuracy is essential.