So the US government is buying the banking industry...

Honest, I really hope this is not a stupid question (difficult to prevent as I have often demonstrated myself to be an inquisitive idiot) but…

The US Gubmint has given itself $700 billion to “fix” the mortgage crisis. To buy “bad loans.” In some cases…to buy shares in the businesses themselves. To essentially buy a controlling interest in humongous financial institutions, and thereby, assume direct control of the lending side of American finance. Yeah?

If we (the government which is us, right? RIGHT?) acquire control of these corporations, isn’t that like…nationalizing them? Strictly speaking?

And should I be uneasy about that?

Generally, nationalization implies complete government ownership, or at least controlling interest- and usually, it refers to government ownership or control of a whole industry or financial sector rather than a single entity (although a single entity may be an an entire industry, such as British Telecom in Britain until fairly recently). Medicare, Medicaid, Social Security, any one of a hundred government insurance programs- all government programs which are mandated to provide services which would otherwise be handled by the private sector.

Should you be uneasy? That’s probably not a GQ question, but no, not really.

The US inter-city passenger rail industry was nationalized in 1971 (as Amtrak) and has remained so ever since. The TSA essentially constitutes the nationalization of airport security, which pre-9/11 was entirely handled by the private sector. The Postal Service is a nationalized industry. The Federal Reserve is a nationalized industry, in a sense.

Personally, I’d draw a line between nationalizing stuff the maintenance of which is in the public interest- roads, rail, utilities, the central bank, oil, etc. - and purely commercial interests which are of no direct benefit to “the people”.

If the government nationalizes Mattel, Kraft Foods, AOL Time Warner, etc., then you should definitely be a bit worried.

Well, there can be a difference between government buying some amount of ownership (but not a controlling interest), buying controlling (but not all) interest, and outright nationalization (complete control). Whether it’s an important difference depends on your point of view.
I think what most people envision happening is the US taking some ownership stake in companies, but with the intent to sell off the stake later on when the crisis is over. So while it’s possible the US government could have a controlling interest, and therefore be able to replace management and otherwise set company policy, the management would not be government employees directly, and would expect to be fully privately owned at some point.

As to whether you should be worried… MHO is that the concept is not necessarily scary, but you should be somewhat worried about how it’s implemented. Particularly since the guy in charge either couldn’t see this crisis coming or didn’t do anything about it until it was a huge crisis. Not really the guy you want to trust to fix it. Especially since he by background and outlook seems to be far more sympathetic to the plight of financial industry management than to, say, U.S. taxpayers as a whole.

So, some 200 years later, Alexander Hamilton wins over Thomas Jefferson!