Semantic Nitpickery We Can Believe In:
The Obama administration, which says it doesn’t want to nationalize U.S. banks, may find itself taking another step in that direction if it converts the government’s preferred shares in Citigroup Inc. into common equity to help the firm withstand losses.
Citigroup and rival Bank of America Corp., beaten down in New York trading last week on U.S.-takeover speculation, are among more than 20 lenders that could wind up majority-owned by the government if such conversions took place. Executives at New York-based Citigroup have discussed the change as a way to quell concerns about capital adequacy while heading off all-out nationalization, according to a person familiar with the matter.
The executives are promoting it themselves. That should say about all you need to know about the idea.
U.S. regulators led by the Treasury Department announced today that the government stands ready to take bigger bank stakes in the form of shares that “would be converted only as needed over time.” To analysts including Paul Miller of Friedman, Billings, Ramsey Group Inc., nationalization of some of the nation’s largest lenders appears well under way. The government already holds $52 billion of preferred shares in Citigroup, five times the bank’s market value as of Feb. 20.
“We’re already in the nationalization phase,” Miller said today on Bloomberg Television. “We already own a chunk of Citigroup and Bank of America. The problem is that the government is dancing around this nationalization issue. They do not want to do it.” (emphasis mine)
Ownership, to the average person, naturally implies full control. This is why, for an unrelated example, people balk at restrictions on what they can do with music they’ve purchased: if they don’t have control then WTF did they just pay for? In the case of Citigroup, they’ve already sunk so much of our money into it that they have more than the company is worth on the table — yet this is not government ownership somehow.
This fence-sitting, despite the image, is not an effort to avoid a huge structural leap. If Citigroup (and, by extension, any other of the megabanks) were viable as a private institution it would not need government favors. Calling its condition “nationalized” or not makes no difference, since as we all know the point is keeping it up. This is because the alternative — the State no longer promoting centralization of finance, and such institutions going the way of the dinosaur as a result — is inconvenient to think about.
BTW: for any mainstream liberals reading this, I’d hope you could realize by my other posts that I think this whole bailout song and dance is a moot point (since the real problem is structural, and “solved” would mean the entire economic system as we know it were scrapped and reset), and not think that criticism of your point means anyone on the “other” side makes sense in comparison. Right-wing insistence on screaming “socialism!” at measures that clearly serve to maintain as much of the corporate status quo as possible shows they’re looking at the Overton Window in reverse. No self-respecting socialist would think Citigroup worth the effort.