Legal Commentary

Adopting Tea Party Rhetoric?

By Big Tent Democrat

Paul Krugman and Andrew Ross Sorkin got into it the other day when Sorkin mischaracterized Krugman's views on the need for large insolvent banks (specifically Citi and BoA) to be taken over by the FDIC (a process that happens every week btw with smaller insolvent banks.) The spat drew the attention of NYTimes Public Editor Clark Hoyt:

[A] full and fair reading of the [Krugman] column [. . .] does not support the notion that he favored nationalizing the entire banking system. [. . .] I sent Sorkin a message telling him that I did not think his citations supported his argument that Krugman had called for nationalizing the entire banking system. In a long written message and two phone conversations, he said he regarded his differences with Krugman as “an issue of semantics” over the meaning of nationalization.

(Emphasis supplied.) Sorkin is right --he has adopted the rhetoric of the Tea Partiers and completely changed the understood meaning of the term "nationalization." Once upon a time, we all understood what nationalization meant. Mexico nationalized its oil industry by taking over ownership. Chile nationalized its copper industry by taking ownership of it. Sorkin chooses the Tea Partier way:

In Sweden’s case, he said, the government took over some banks but guaranteed the debts of all of them. “That’s how many people would define ‘nationalizing the entire banking system,’” he said.

Krugman disagreed. “Guaranteeing liabilities is not the same as nationalization,” he told me. “Nationalization is what happens when you clean out the shareholders, and the government becomes the owner. I never suggested that for all banks.”

I am not an economist or a business writer, but I have always understood nationalization to be a government takeover, not guarantees to creditors.

This new Tea Partier definition of "nationalization" Sorkin adopts does raise some questions for him though. For example, did TARP "nationalize" our financial system, given its de facto guarantees of the financial industry? Does Sorkin consider the government subsidies for the purchase of health care to commence in 2014 to be "nationalization" of the health care industry?

The reality is probably more mundane. Sorkin made a mistake and does not want to fess up. Egos are involved. Believe me, I know how that happens.

Speaking for me only

Full post as published by TalkLeft on April 18, 2010 (boomark / email).