Does Geithner Now Favor Nationalization?

For the past couple of days there's been talk about a perceived double standard at the heart of the administration's auto policy. From the left, or thereabouts, comes the question of why Obama would force out GM CEO Rick Wagoner but leave Bank of America's Ken Lewis in place. From the right, more or less, comes the question of why Obama would jettison Wagoner but allow Ron Gettelfinger to keep the top job at United Autoworkers.

Most of the discussion focused on the symbolic nature of the management shift: The administration needed to create the perception a new direction, show it was getting tough, and so forth. But now it's become clear that the administration is also interested in replacing all or some of GM's board. And Tim Geithner is defending that move in substantive terms -- not as part of a symbolic "new direction." Here's what he told Katie Couric:


"We have changed management board[s]," he said. "And where we've done that, we've done it because we thought that was necessary to make sure these institutions emerge stronger in the future."

But is replacing the CEO and the board of a company really that different from nationalizing it? I know that the government doesn't own any shares of GM, and I know the new board members won't be getting paychecks signed by Rahm Emmanuel. But the government is basically doing what an involved majority shareholder would do if it were unhappy with the management: It's cleaning house.

Recommended Reading

If it's not different, then this is either a change in policy or a double standard. Picking from a wide selection of past statements, here's what Geithner told NPR in early March on the subject of bank nationalization:

"It's not the right strategy for the country," Geithner said, "for basic practical reasons that our system will be stronger if it remains in private hands, with support from the government to make sure those institutions can play their critical role going forward."

But if the government replaces the board of GM, it can hardly be said that the company remains in private hands. So why is the government confident that it can manage GM and have it "emerge stronger in the future," but convinced that other companies will be "stronger if [they] remain in private hands"?

There are three possible answers:

(a) Replacing the board of a company is actually quite different from "nationalization" as commonly understood.

(b) The government is actually better able to nationalize a large car manufacturer than a bank.

(c) The government is applying a different standard to automakers (or has developed a new standard, and automakers are the first to be subject to it).

Which is it?