The Commanding Heights


I hadn’t really ever thought that the Bush administration was going to wind up giving us the large scale nationalization of industry, but I’m not sure what else you call it when we follow up the deprivatization of Fannie and Freddie with the Fed securing an eighty percent stake in AIG in exchange for giant loan that the company desperately needed. With the auto industry also clamoring for bailouts we’re perhaps moving in the direction of Lenin’s New Economic Policy in which a market economy exists on small scales while the state controls the “commanding heights” of heavy industry and finance.

On a perhaps less jokey note, I’m a little surprised to learn that this is legal without some kind of legislation. It seems pretty far afield from the Fed’s traditional domain. I guess in a storm people don’t care about the niceties.

Meanwhile, these are some pretty big companies the government now owns and, among other things, this raises the question of how these companies are going to be run. There could be an effort to manage them in the broad public interest or out-of-control crony capitalism or something like the situation in present-day Russia. It seems to me that there this step has uncertain implications far beyond the world of high finance.