Wisdom of Private Enterprise.

The U.S. Government has a bad history of attempts to fund and invest in private enterprise for the pursuit of policy.

This will be a two-part Series on Cogport.com

The Trump Administration recently pressured Intel Corp to transfer 10% of company stock to the Government based on previous funding provided under Biden.

Intel is a declining company that was once great.  It felt compelled to yield to Government demands to support itself. 

Is this Good Policy ?

Cogport does not support the Government taking private investment like Intel.

This First Part will cover the broad context of this issue, and why Major Exceptions have been necessary for the Government to provide funding in Extraordinary Circumstances.

BACKGROUND

The Federal Bureaucracy is not equipped or capable of investment decisions in private companies.  Investment decisions should be left to the wisdom of the Free Market.

Private Investors are the most capable to decide on the winners and losers.  It is their own money on the line, not the taxpayers. And they choose wisely.

It is the natural course of business that losing companies decline.  They recover on their own or go out of business.  That is the efficiency of a Competitive Economy. 

Government Bureaucrats cannot duplicate this efficient system.

And it is not the Government’s business to prop up losers.

But there have been Major Exceptions made in the past.  

There are cases where Government Policy needs to be directed to critical supply and security issues.

In the 2008 Financial Crisis, many Large Banks and Investment Firms were on the verge of collapse.  Some big ones did – overnight like Lehman Brothers.

These firms were deemed “Too Big to Fail.”  And that was true: major bank failures would have led to collapse in the Economy.

How did it happen ? 

A practice of high-risk lending and lack of regulation under the Bush 43 Administration and the Bernanke Federal Reserve.

Real Estate Mortgages were packaged and bartered like commodities. 

When home prices started falling, it all imploded as overleveraged homeowners went under water and defaulted in droves.  Bad for them and bad for the owners of the mortgage-backed securities.

Henry “Hank” Paulson, the former CEO of Goldman Sachs served as U.S. Secretary of the Treasury from 2006 to 2009.  In that capacity, he was the principal architect of the TARP bailout initiative during the 2008 financial crisis.

• Authorized amount: $700 billion was initially authorized under the Emergency Economic Stabilization Act of 2008.

• Disbursements: By October 2012, about $431 billion had been disbursed.

T

reasury return and net cost: Despite these disbursements, the government ultimately recorded a net profit of about $15.3 billion from TARP.

This engineered bailout was necessary and saved the economy from serious consequences of bank failures.  It was a case where the Government took appropriate action to prevent collapse.  And it turned into a net profit when it was all paid back.

On top of that, the U.S. auto industry was also facing bankruptcy.  Another case of “Too Big to Fail.”  The threat to the economy and jobs was imminent.

A bailout was also arranged by the Government.

Late 2008 – Initial Auto Emergency Loans

• December 19, 2008 – Up to $17.4 billion in emergency loans for General Motors (GM) and Chrysler from TARP funds, to prevent immediate bankruptcies and mass layoffs.

  • GM received $13.4 billion in loans.

  • Chrysler received $4 billion.

Both were given deadlines to submit viable restructuring plans by spring 2009.

Under Obama, Settlement of the Auto Loans

Resulted in a Loss of ~$10.2 B

These Cases are examples of Emergency Measures rightly taken.

However, Government funding and investment in private companies should be the Exception, and Not the Rule.

There are Policy choices other than government funding or direct investment to shift things in the right direction.

In the Second Post, Cogport will discuss more recent examples of bad policy funding decisions and proposals for better ways to encourage needed economic development.

David Hollaender                                           Sept 4, 2025

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