By Kenneth G. Pringle
President Donald Trump's approach may be unique, but the U.S. government has been taking a hand in private industry from its beginnings.
It hasn't always been pretty.
In 1949, for instance, scandal gripped the Truman administration when an $11 million government loan appeared to favor Boeing, a Democratic contributor.
A Senate investigation uncovered a government agency run by "an influence ring with White House contacts" that was paying off political favors in corporate loans, mink coats and Florida vacations.
The charges "show a complete lack of understanding of what is morally right and proper for a government employee," said no less an authority on the subject than Sen. Richard M. Nixon (R-Calif.), according to Barron's on May 19, 1951.
President Harry Truman survived, but the agency didn't.
The U.S. has mostly stuck to a hands-off position ever since. A notable exception was the car maker and bank bailouts of 2008, which saved those industries but remain unpopular today.
Now, Trump has announced deals for the U.S. to become the biggest shareholder of Intel with a 10% stake; receive a "golden share" in the new Nippon Steel-U. S. Steel combination; and take a cut of Nvidia's and AMD's microchip sales to China.
And he promises more.
The moves are drawing cries of " socialism" from critics on the right like Sen. Rand Paul (R., Ky.), while attracting cheers from socialists like Sen. Bernie Sanders (I., Vt.) on the left. Others see it as a path toward favoritism and corruption, as they did during the Truman years.
Yet Trump's efforts hark back to Alexander Hamilton, the nation's first Treasury secretary, who argued the government should support America's fledgling industry with tariffs and investments.
Hamilton was focused on the U.S. becoming self-sufficient "for military and other essential supplies," and not relying on imports, he wrote in his influential Report on Manufactures in 1791.
His signal achievement was the founding of Paterson, N.J., as a planned industrial city. He corralled private investors to bankroll it, offering tax-exempt status in exchange for holding much of the capital stock in government bonds.
It was a model for public-private partnerships to come.
Starting in the 1820s, national and state government invested in transportation projects -- turnpikes, canals and railroads. These had mixed results.
Consider the land grants involved. Federal and state giveaways reached nearly 200 million acres; 16% of Nebraska's land mass was handed over to the railroads. Much of it was then sold to land speculators.
From this act of government largess rose men such as Cornelius Vanderbilt and Jay Gould, whose wealth and business practices earned them the moniker, "robber barons."
Yet the railroad also linked the disparate regions of the U.S. into a cohesive nation, and jump-started its rise as an industrial powerhouse.
Then the economy crashed in 1929. The Great Depression proved too severe for free enterprise to save itself.
The Reconstruction Finance Corp. was an initiative of President Herbert Hoover, established in 1932 as lender of last resort for struggling banks and businesses.
Hoover, a laissez faire Republican until then, insisted that RFC loans only be used to help "income producing and self-sustaining enterprises which will increase employment," The Wall Street Journal reported on May 14, 1932.
By 1949, the economy was on better footing, and Republicans questioned the RFC's $11 million loan to Northwest Orient Airlines for the purchase of 10 new Boeing 377 Stratocruisers. Was it payback for supporting Truman?
There was also an alleged $100,000 kickback to the Republican National chairman, and the press's favorite -- a "natural pastel royal mink" coat worth $9,450 handed out to a White House stenographer. Under the weight of the scandal, the RFC was put out of business in 1954.
The financial crisis of 2008 was America's worst economic setback since the Great Depression, and President George W. Bush's response echoed that of Hoover's decades earlier.
"Government has a responsibility to safeguard the broader health and stability of our economy," Bush said on Dec. 19, 2008, announcing an
auto maker rescue plan.
"Auto task force takes the wheel," was the Chicago Tribune headline on March 31, 2009, when President Barack Obama's team assumed effective control of General Motors and Chrysler.
Not everyone was happy.
"When governments run companies, profits become subservient to political concerns," columnist John Tomlinson wrote in the Flint, Mich., Journal on Nov. 23, 2008.
In the end, the government lost some money on its $50 billion bailout of GM and $12 billion of Chrysler, making a small profit on the greater $426 billion Troubled Asset Relief Program that rescued Wall Street and the banks.
No fraud was charged. But the bailout of auto makers and banks, while average Americans struggled through the 2007-09 recession, was cited for the rise of both the right-wing Tea Party and the left-wing Occupy Wall Street movement, and a widening of America's political divide.
Under Trump, the U.S. government is again an industry player. Unlike the past, there's no talk of an exit strategy.
It looks like America is buying and holding these companies.
And Trump isn't through.
"I hope I'm going to have many more cases like it," he said after the Intel announcement.
What could go wrong? As long as everyone involved has an "understanding of what is morally right and proper for a government employee," as Nixon put it, we'll be fine.
Write to editors@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
September 03, 2025 01:30 ET (05:30 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.