Matthew Yglesias » “Nationalization” Versus “Deprivatization”

Sep 8th, 2008 at 10:32 am

“Nationalization” Versus “Deprivatization”

Paul Krugman says he doesn’t like the term “nationalization” as applied to the government takeover of Fannie and Freddie:

The fact is that Fannie Mae was originally a government agency; it was privatized in 1968, not for any good economic reason, but to move its debt off the federal balance sheet (and Freddie was created 2 years later as a competitor.) Private ownership of Fannie and Freddie never made any real sense, and was always a crisis waiting to happen.

So what we’re really seeing now is deprivatization. It’s not something like the UK government seizing the steel mills; it’s more like firing Blackwater and giving responsibility for diplomatic security back to the Marines.

That sounds reasonable enough to me.

Comments
27

27 Responses to ““Nationalization” Versus “Deprivatization””

El Cid Says:
September 8th, 2008 at 10:43 am
Yet if it were President Gore doing this, no doubt it would be called the Sovietization of the economy, and the righties would be screaming about how the Democrats had been listening to Hugo Chavez, etc.
Johnny Be Good Says:
September 8th, 2008 at 10:44 am
http://1.bp.blogspot.com/_cW9iMEJDhHU/SJnTsLotwYI/AAAAAAAAAEc/IqyEIldgbA0/s1600-h/PROCESSEDMcCain2008.jpg
Peter Says:
September 8th, 2008 at 10:48 am
Whether you call it nationalization or deprivatization, either way it’s going to cost the taxpayers a whole lot o’ money.
Marshall Says:
September 8th, 2008 at 11:04 am
Oh don’t be fooled. That’s bullshit. A company that’s been private for 40 years is a private company.

As the great Barney Smith said, it’s time to start thinking about Barney Smith and not Smith Barney. Those dumb enough to invest in Bear Stearns, Fannie, and Freddie were bailed out, but when Barney Smith invested in his own home what did he get? The bankruptcy bill.
Mary Says:
September 8th, 2008 at 11:10 am
I like the term “nationalization” because I think it provides an excellent frame for pundits, especially those that are spelling-challenged, to make the argument that the Republican party, despite all of their fancy free-market talk, can always be counted on to socialize the costs and privatize the profits. Fannie and Freddie are perfect examples, as was the S&L crisis from the late 80’s and early 90’s.

The wipeout of the common stock is a red herring. The fat cats got out of the common stock months ago and left the old age pensioners and other common folk holding the bag when the wipeout came.
Don Williams Says:
September 8th, 2008 at 11:20 am
Re “It’s not something like the UK government seizing the steel mills; it’s more like firing Blackwater and giving responsibility for diplomatic security back to the Marines.”
————
Bullshit. FALSE ANALOGY. Because taxpayer money was not at risk before and it is now.

It’s more like taking over Enron and assuming Jeffery Skilling’s debts. WITHOUT first knowing what laid in the “off balance sheet” minefields.
Don Williams Says:
September 8th, 2008 at 11:23 am
Re Mary’s comment “The wipeout of the common stock is a red herring. The fat cats got out of the common stock months ago”
————
The REAL Fat Cats who made out were those who were holding $5 TRILLION of rapidly rottening dreck yesterday and now have $5 TRillion of securities covered by the full faith and credit of the US Treasury.
Glazius Says:
September 8th, 2008 at 11:27 am
Yeah. The FMs made and paid profits to private investors for years, and now that they’re losing money the government goes on the hook to bail them out?

That’s privatized profits but socialized losses.
Rock On Says:
September 8th, 2008 at 11:29 am
Of course, these “fat cats” are also the holders of half the mortgages in the United States, meaning that if the companies were to fail, the economy would pretty much self-destruct. But you know, keep whining.
right Says:
September 8th, 2008 at 11:33 am
it’s more like firing Blackwater and giving responsibility for diplomatic security back to the Marines.

To perhaps parse the analogy a little too closely, it’s more like the Marines buying Blackwater at a bottom-barrel price in order to better control its behavior.
Akhbar Says:
September 8th, 2008 at 11:47 am
He’s right, but not for the reason he suggests. If they had really been private companies, then there wouldn’t be any excuse to call it anything but privatization. That it has once been public is an interesting historical fact, but doesn’t have much bearing on the nature of what is happening now. That it’s privatization “never made any real sense” certainly has no bearing on the question whatsoever.

However, this really is unlike a straight-up nationalization because Fannie and Freddie weren’t really private in the first place. The implicit – and, more recently, explicit – backing of the companies made them a very different sort of beast. Getting rid of this quasi-privatized arrangement is all to the good, and does warrant a different term (though ‘deprivatization’ doesn’t seem like the best replacement).
crease Says:
September 8th, 2008 at 11:51 am
Deprivatiztion sounds quite “Socialist” to me if the left did it and the re-pukes spin it the Reich Way. It`s a bailout for the rich and a tax burden for us.This bailing out of Wall street needs to be put to a stop and start bailing out Main street.
Jeffrey Davis Says:
September 8th, 2008 at 12:00 pm
Of course, these “fat cats” are also the holders of half the mortgages in the United States, meaning that if the companies were to fail, the economy would pretty much self-destruct. But you know, keep whining.

Criticism isn’t whining, and regardless, what’s criticized here isn’t people getting wealthy by making mortgages.

But you knew that.
kafka Says:
September 8th, 2008 at 12:20 pm
Does Matt ever bother to understand the things he blogs about, or does he just parrot some “pundit” he considers ideologically agreeable?

In any event, from the NYT (and it ought to make you mad):

http://www.nytimes.com/2008/09/08/business/08scorecard.html?ref=patrick.net

Tidbit: Daniel Mudd and Richard Styron, the Fannie and Freddie CEOs could get $millions in severance packages as they are shown the door. Mad yet?
Mary Says:
September 8th, 2008 at 12:21 pm
Can I also add that this deal was set up to provide a relatively short term boost to the markets and obscure the fundamentally bad economic news from the electorate until after the elections. When people see that the market has not crashed, they will discount this news and not understand that the Bush Administration has extracted another many thousands of dollars of a hidden tax on the middle class of this country.

My hairdresser is ex-Israeli Air Force (I know, Zohan!) and Likud. A few months ago, he was marveling to me that the Iraq war cost $8,000 per head of every taxpayer in the US. At first I thought he was commiserating with me about the cost of the Iraq war. Recently, he expressed his support that the U.S. attack Iran for Israel. At that point, I realized that his early marveling over the cost of the Iraq war was approval at the enormous cost burden picked up by US citizens on a head by head basis for a war that he felt was waged in large part for the benefit of Israel. I tell this story only to emphasize how powerful it is to discuss the costs incurred by US government actions on a head by head taxpayer basis.

I think that if the public were made aware of the cost of this bailout per taxpayer, the bad economic news might begin to get through, notwithstanding that the markets have been propped up with the knowledge that the US taxpayer will be picking up all of the costs for the mortgage crisis. The cost per taxpayer calculation caused by the earlier S&L crisis, normalized to today’s dollars, as well as the cost per taxpayer to opening up the discount window to all financial institutions would also be very helpful in understanding the cost of this bailout and the deleterious economic effect on the average taxpayer.
pseudonymous in nc Says:
September 8th, 2008 at 1:31 pm
either way it’s going to cost the taxpayers a whole lot o’ money.

Through what means? Through the usual one of getting China to buy Treasuries? Cover the debt that the bond-holders took at a premium by getting them to pay for more?
Don Says:
September 8th, 2008 at 9:46 pm
On Sean Hannity today, he blamed it on Clinton; stating that FM
were created during the Clinton administration. Just one more example of how illiterate he is when it comes to history.
or more likely, he just can’t be bothered.
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Matt Yglesias

“Nationalization” Versus “Deprivatization”

27 Responses to ““Nationalization” Versus “Deprivatization””

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