President Trump said Thursday that he supports the controversial idea of having the government take equity stakes in some companies that receive federal funds as part of the coronavirus stimulus effort.
The White House’s top economic adviser, Larry Kudlow, had floated the idea on Wednesday.
The background: Taking equity stakes would be a way to protect taxpayer money, but it can be extremely controversial — or at least it was more than a decade ago, when the Obama administration did it in the wake of the financial crisis. Critics decried the idea of having the government involved in the ownership of private businesses, even if those equity stakes turned out to be profitable for the government.
“While deeply controversial politically, taxpayer backstops for the financial, automotive and housing-finance industries during the 2007-09 crisis were a key component of averting another Great Depression,” Bloomberg’s Justin Sink and Luke Kawa write. “While there were losses in some cases, equity stakes helped the government come out ahead on many of the transactions.”
Sink and Kawa note that Kudlow had been adamantly opposed to such government intervention in the wake of the 2008 financial crisis and called the Obama administration’s rescue of General Motors “an attack on free-market capitalism.”
“Call it Bailout Nation or Ownership Nation, it’s an unprecedented degree of government command, control, and planning, all in the name of a tough economic downturn,” Kudlow reportedly wrote at the time.
This week, Kudlow said that the 2008 GM bailout had been a good deal for the government.