Businesses are facing unprecedented financial stress as a result of the Covid-19 pandemic and the associated shutdown of much of society; after all, companies must continue to pay their bills, even without revenue. Policymakers must determine how to offer businesses the relief they need—and what strings should be tied to that relief. Some on the left are calling for nationalizing businesses that get aid, or demanding a share of their profits, after the economy recovers. This idea is even taking root among some Republicans. President Trump has considered letting the federal government secure an equity stake in businesses as a condition of bailouts. Though the recent federal CARES Act didn’t seize equity from large corporations accepting government loans, Treasury Secretary Steven Mnuchin said that the government retains that option.
A precedent exists for the federal government to take ownership in private companies. During the 2008 financial crisis, Washington took an equity stake in auto companies and banks that received bailout funds. The government sold its position after the loans were paid back.
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