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When the government owns companies

September 18, 2008 by Gene Veith 19 Comments

So the U.S. government bailed out the insurance giant AIG. But we did not just bail it out by giving it a loan or guaranteeing its solvency. We bought 80% of its equity. So the U.S. government now essentially owns it. The government also “seized” ownership of Fannie Mae, which I admit was a strange sort of public/private hybrid. But when the state owns companies, isn’t that socialism? (Someone please correct me if I’m interpreting all of this incorrectly.)

Filed Under: Economics 19 Comments

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About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

fw
socialism plain and simple.
So I guess now that abortion is the ONLY issue that makes republicans “conservative”? and then only partially so since they support, as individual politians, exceptions for rape and incest.
The Bush administration has 800 billion at its full disposal to do WHATEVER it wants to do.
It seems someone wrong that congress would give an unelected official this kind of power in the executive branch. but it is what Bush asked for and got.
Anon
In socialism the State owns the means of production outright. In this case, it looks more like a State-Corporate bundling. I believe the Latin term for bundle is fasces. Mousolini (but not Hitler) would have recognized the economics.
Kirk
@FW: Guns! Guns make republicans constitutionalists and therefore conservative.
fw
Might I point out the very obvious here…
The democratic congress gave the Bush administration an $800 billion blank check when it asked for it.
The decision to SPEND that blank check and how to spend it rests ENTIRELY with the republicans and the Bush administration.
FOUR MORE YEARS!!!!
http://kelly.sincitywolskes.com Kelly W
My father and I came to much the same conclusion yesterday. I would add, too, that at least Hugo Chavez had the sense to seize successful solvent companies. The US Gov’t is only interested in failing corporations. If we are going to socialize, can’t we do it in a way that makes some money?
http://www.brbible.org Rich Shipe
Whatever label you put on it is fine by me. Bottom line is a market is not free if it is run by the government.
Also, I heard on the radio (NPR so it must be true!!) yesterday that it is a loan and if they default than the “taxpayers” (the word NPR used) will get an 80% stake in the company. I might have missed the details and of course NPR could have the facts wrong.
Side note, isn’t it interesting that when talking about federal accounting all assets (owning 80% of a company) are owned by “taxpayers” and all liabilities (government spending) are owned by the government. In other words spending for programs isn’t spending taxpayer dollars but government dollars and owning a company is by the taxpayers.
Exit question: At what point does Social Security merge into 401ks and your money is “invested” into government owned companies. Best of both worlds!
http://www.scyldingsinthemeadhall.blogspot.com The Scylding
Pigeonholing is not going to help. There is a sea of possibilities between absolute socialism and an absolute free market. A couple of states claimed the former during the cold war era (Albania and some others I think). No economy has ever reached an “absolute free market”, or anarcho-capitalism.
In a very rare step for me I think I have to agree with the Bush admin here – it is difficult to see what else they could have done that would not have done greater economic harm to the average man on the street, nevermind the international economy. Adherence to an ideology, even an economic one, at all costs, is not healthy. It elevates it to the status of religion.
I even heard some critics claim it is unAmerican to do it, as if that is the worst possible acquisation possible. That isa pretty bizarre.
Anon
Scylding, defining terms doesn’t help? Being able to make distinctions doesn’t help? You sure didn’t learn logic the way I did!
WebMonk
Anon, Scylding is talking about “pigeonholing” not “defining terms”. Of course defining terms is useful; he never implied otherwise.
Reading comprehension – learn it, use it.
http://www.scyldingsinthemeadhall.blogspot.com The Scylding
Amen, webmonk!
fw
#1o the scylding
scylding has a truly worthy blog. yáll should check it out.
Don S
Frank — the Fed (Federal Reserve Board) is a quasi-government public corporation, under oversight of Congress. It is not part of the Bush Administration, so your comments about $800 billion and the Bush Administration, and your efforts to lay the whole AIG thing on Republicans and Bush make no sense. Both parties are responsible for all of this and Congress is in the charge of the Democrats.
Anon
Webmonk, sorry, but while he used the term ‘pigeonholing’ what he was referring to was defining terms, and I called him on it. As you say, Webmonk. “reading comprehension, use it”
Anon
Now for some facts on McCain versus Obama on the current economic situation, which it turns out is proximally due to Clinton’s anti-redlining regulations, which McCain tried to correct.
http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print
http://www.americanthinker.com/2008/09/presidents_and_the_economy.html
http://www.scyldingsinthemeadhall.blogspot.com The Scylding
Anon – you have some fine mind-reading tricts that work accross the ether. Jedi-master perhaps?
I was not talking about defining terms: I was thinking about forcing muddled situations / grey areas into black/white categories, pointing out that there are amultitude of possibilities that do not fit those tidy categories. I have to say here that it appears that you missed the ball on that one.
fw: Thanks for the compliment – it is nice if one’s meagre attempts get noticed (no feigned humility here, I hope – there are many very wel written blogs out there!).
fw
#12 nope. in this case decisions are being made by paulson in close consultation with Bush. Bush , according to the authority given by congress, must approve of everything. the treasury secretary is directly under president bush.
I am really not “blaming” the republicans here. That is because I really don´t see how they could really do anything else under the circumstances.
I could point out that deregulation has been championed by republicans and applauded regardless of whether it was clinton (who fiscally was more republican than democrat in many ways…) or the republicans or whoever implemented all this.
Is it not fair to say that Republicans have publicly lead the charge for deregulation over the past quarter century?
I am merely stating that the Bush administration IS in charge of what is being done here.
fw
#12 don
in fairness maybe I am missing something. My understanding is that Paulson from the treasury department asked congress for authority to spend up to 800 billion and got it.
all the news reports I am reading indicate that the treasury secretary is calling all the shots with the full consultation and approval of president Bush and in close consultation with barney frank and others in congress , mostly democrats…
no one seems to really be criticizing paulson much yet. they seem to mostly think he is the right man for the job just now.
you seem to think I am mischaracterizing things by saying that the bush administration is making all the decisions through paulson now and is the position of leadership on this. how is that wrong? who then is deciding all this stuff?
Don S
Frank, it sure looked like you were trying to lay the blame for all of this mess on Republicans. My apologies if somehow I misunderstood the comment “The democratic congress gave the Bush administration an $800 billion blank check when it asked for it. The decision to SPEND that blank check and how to spend it rests ENTIRELY with the republicans and the Bush administration. FOUR MORE YEARS!!!!”
Obviously, the Fed in this instance is not acting entirely on its own, but rather in close consultation with both the administration (Republicans) and Congress (Democrats). This, despite Harry Reid throwing up his hands yesterday and saying he had no idea what to do. Now, that’s leadership.
As for “deregulation”, that was bi-partisan, and Clinton had a particular interest in pursuing it during his administration. Fannie Mae and Freddie Mac were largely Democratic institutions, as you know. Affordable housing initiatives (anti-redlining, easy mortgage credit to lower income buyers, etc.) also contributed.
We will be a lot better off if both parties stop throwing blame around, take it on themselves equally, and figure out the best way forward in a bipartisan manner. Any chance of that, do you think?
Michael the little boot
Don @ 18,
“We will be a lot better off if both parties stop throwing blame around, take it on themselves equally, and figure out the best way forward in a bipartisan manner.” Amen! Totally agree. These people need to stop stuffing themselves with our tax dollars and start doing their JOBS.
“Any chance of that, do you think?” Um, no. No. No chance at all. Or such a small chance it might as well be nonexistent.