The worst thing about ideological sloganeering is that it obscures, rather than clarifies, the facts of a situation.
Exhibit A: The question of whether we should "nationalize" our crippled banks. To the political right, the very word smacks of the world of banana republics. To the left, it's just what those idiots on Wall Street deserve, and long overdue.
To the center -- let's call it the Obama administration -- it's an intriguing concept, but not really suitable for these United States.
Yet if you peer beneath the terminology at the underlying reality, it's obvious that nationalization of the banks is a done deal. We bought them. We own them.
The only problem is that we've failed to exercise our right to control them.
As part of its $700-billion bank bailout, the U.S. government is injecting $45 billion of taxpayers' cash into each of the two most impaired institutions in the elephantine herd, Bank of America and Citigroup. The government has also pledged to cover $419 billion in losses at the two institutions.
The cash injections alone are almost enough to buy up all of BofA's outstanding common stock twice over and Citi's stock three times over. Yet the government has failed to demand any specific performance in return. There have been no sackings of management and no mandate that the money be applied to support loans in credit-strapped sectors, like small and medium-size businesses.
Former Treasury Secretary Hank Paulson presented his hands-off policy as a plus, as though giving banks money but not instructions is the American Way. His successor, Timothy Geithner, hasn't shown that he feels much differently.
So it's unsurprising that the banks still act as if Job One is to maximize shareholder value. BofA Chairman Ken Lewis told Congress last week that he was determined to "balance the interests of customers, shareholders and taxpayers." That struck Campbell R. Harvey, a banking expert at Duke University, as "the opposite of what it should be. BofA would be bust without the U.S. government. The taxpayer should be No. 1, not No. 3."
Indeed, we're still trying to coax the banks into doing the right thing, as though they should do us a favor. Didn't we do them a favor?
The most recent example is the housing recovery plan President Obama announced Wednesday, which attempts to make home lending and foreclosure relief more palatable to banks by offering them more taxpayer-financed sweeteners.
No wonder the taxpayers' capital seems to have been flushed down the sewer.
"Stuffing the banks with money just enables incumbent management to hang on and enables current holders of bank stocks to pretend they still have value," James K. Galbraith, an economic policy expert at the University of Texas, told me this week.
Galbraith says the bailed-out banks should be declared insolvent and taken over by the FDIC to be restructured or split up, whichever is best.
Calling this "nationalization" is misleading, the professor says, because what needs to happen isn't the political act implied by the term, but a regulatory act.
Step One should be dumping current management, he says. The banks' CEOs argue that their executive caste needs to stay put because they know best how to run the place. This is the sort of argument my mother used to characterize as, "I like me, who do you like?"
Even if one agrees that a core of professional management should be left intact, what's the rationale for not firing the boards? Bank directors presided over a disaster in a collective stupor, yet unaccountably continue to hold on to their seats with what George Orwell called "prehensile bottoms."
At BofA, the board of directors includes several current or retired business executives, a college president and Gen. Tommy Franks, architect of the brilliantly executed Iraq war.
My favorite director is Jackie M. Ward, a retired software executive who also serves on five other boards. These companies paid her total annual compensation of more than $1.5 million in cash and stock last year, according to their latest disclosure statements. The six corporations scheduled a total of 52 board meetings over that time, so she got $28,840 per meeting.
Personally, I'd do it for half as much, especially if I could read the paper and catch up on my sleep during meetings, as the average director seems to have done.
I don't mean to pick on Ms. Ward, who for all I know is still a business dynamo at the age of 70. Yet given that she chairs the BofA board's committee on asset quality, which is ground zero of the company's implosion, might the institution not have been better served if she had focused on this one thing?
Certainly a government order to fire the board would begin to look like "nationalization," but that's beside the point. One consequence of our obsession with the term is that it tempts people across the political spectrum to base their model on Sweden, which "nationalized" its banking sector during a financial crisis in 1992.