Nationalization on the Sly


Yesterday I saw Andrew Sullivan on the Chris Matthews Show hypothesizing that at the end of the day Barack Obama is going to nationalize some large banks after all, and that the point of the complicated-and-somewhat-hazy Geithner plan is to try to convince people that he’s doing this because it’s genuinely necessary and not just a fit of left-wing ideology. An email correspondent suggested the same thing, also yesterday. And it seems that last night Josh Marshall rounded up a bunch of speculation along these lines.

I’ve been calling attention to the possibility of a backdoor path to nationalization since this plan was announced, so I’m definitely open to that possibility. That said, I’ve noticed an odd tendency in some quarters to, whenever Obama makes a move to the right and therefore attracts some criticism from the left, turn around and criticize those critics on the left for failing to recognize the brilliance of Obama’s secret left-wing plan. From where I sit, whether or not such a plan exists, its execution actually depends on moves to the right attracting criticism from the left. So rather than speculate as to whether or not this is “really” what the administration is planning to do, I’ll just say I think that would be the right thing to do.

The audience that needs convincing, however, isn’t really the public. Ultimately, this kind of bank system bailout is an elite-driven phenomenon. The constituency that matters is, broadly speaking, the executive class of the non-financial sectors of the economy. US business leaders have typically shown a very high degree of class solidarity such that back in 1993 businessmen from throughout the economy stood shoulder-to-shoulder with the particularist interests of insurance company executives to beat a health care plan that would have benefited many of their firms. Similarly, here in 2009 most firms would benefit from a maximally effective financial rescue program rather than from one that’s maximally deferential to the managers and owners of major financial services firms. If the managers of those firms choose the best interests of their own companies, then the political space for nationalization gets quite big. But if the managers of those firms choose to stand by the interests of their economy-wrecking colleagues at the banks then things get tough.