Didn't we already cross this particular Rubicon during the auto bailout a decade ago?

Other examples:

> Since the 1950s, the federal government has stepped in as a backstop for railroads, farm credit, airlines (twice), automotive companies, savings and loan companies, banks, and farmers.

Every situation has its own idiosyncrasies, but in each, the federal government intervened to stabilize a critical industry, avoiding systemic collapse that surely would have left the average taxpayer much worse off. In some instances, the treasury guaranteed loans, meaning that creditors would not suffer if the relevant industry could not generate sufficient revenue to pay back the loans, leading to less onerous interest rates.

A second option was that the government would provide loans at relatively low interest rates to ensure that industries remained solvent.

In a third option, the United States Treasury would take an ownership stake in some of these companies in what amounts to an “at-the-market” offering, in which the companies involved issue more shares at their current market price to the government in exchange for cash to continue business operations.

https://chicagopolicyreview.org/2022/08/23/piece-of-the-acti...

First, what came out of these bailouts?

Each example industry continues to require some sort of government intervention to remain solvent at one point or the other. Auto/banks/saving and loans getting bailouts in 2008/2009. Airlines in 2020/2021 due to COVID etc. These industries employ a lot of people and now have become a political hot zone for voters so there is no way to remove these backstops now.

And whether these industries remain competitive globally is another question. Because it is always funny to hear countries accuse each other of propping up one industry or other through government intervention.

Second, these were industry wide bailouts. This action is not.

The genesis of CHIPS Act is a 2020 deal to onshore TSMC. The idea was to further persuade Samsung and Intel to produce chips in US through tax benefits, loan guarantees and grants. But now with US taking a stake in Intel, the strategy for onshoring TSMC and Samsung becomes unclear. Maybe the idea is to use tariffs to make TSMC and Samsung uncompetitive if they don't onshore but that is a bad idea. Because if Intel finds it easier to just coast on "national security" and continue producing last gen chips, they are going to do that and lower innovation even more. This is a win-win for Intel though.

> the federal government intervened to stabilize a critical industry

They intervened to maintain the status quo. Industries are neither stable or unstable for a long period of time without external influences forcing that outcome. Short term turbulence is to be expected and is beneficial for the market as a whole.

They destroy markets and then lie to your face about it.

> industries remained solvent.

How does an _industry_ become insolvent? Only when it's nearly fully monopolized and when there is no difference between an industry and a single entity. This is where we are currently.

> more shares at their current market price to the government in exchange for cash to continue business operations.

Couldn't they just offer those shares to _any investor at all_? Why is the government special here?

> https://chicagopolicyreview.org/2022/08/23/piece-of-the-acti...

Of course. Chicago school thinking. It's infected our country for decades now. Certainly not to the benefit of it's citizens.

> Didn't we already cross this particular Rubicon during the auto bailout a decade ago?

This Darth Vader style "I am altering the deal, pray I do not alter it any further" gambit is new to the best of my knowledge. If the CHIPS Act had been structured so that it was equity purchases that would be one thing.

The other day I went down a rabbit hole reading about the history of insulin, and learned about the Canada Development Corporation:

>The Canada Development Corporation was a Canadian corporation, based in Toronto, created and partly owned by the federal government and charged with developing and maintaining Canadian-controlled companies in the private sector through a mixture of public and private investment. It was technically not a crown corporation as it was intended to generate a profit and was created with the intention that, eventually, the government would own no more than 10% of its holdings; it did not require approvals of the Governor-in-Council for its activities and did not report to parliament. Its objectives and capitalization, however, were set out by parliament and any changes to its objects decided upon by the Board of Directors had to be approved by parliament.

The CDC was created as a result of Walter Gordon's Royal Commission on Canada's Economic Prospects, and the 1968 Watkins Report commissioned by Gordon, in an attempt to redress the problem of foreign ownership in the Canadian economy by stimulating the development of Canadian owned corporations, particularly in the field of natural resources and industry

About 31,000 private shareholders invested in the corporation. An early purchase of the corporation was Connaught Laboratories, the original manufacturer of insulin.

Major investments owned by the CDC included holdings in petroleum, mines and petrochemicals including Polymer Corporation, an asset transferred to it by the Canadian government. By 1982 the Canadian government had a 58% stake in the Savin Corporation.

In 1986 the Corporation was dismantled as part of the Mulroney government's program of privatization.

https://en.wikipedia.org/wiki/Canada_Development_Corporation

Yes and the scale was far larger, over $80 billion given to GM and Chrysler. GM was majority owned by the US government for a number of years after that too.

Sure, it's been done before, but looking at the end result though, I'm not sure if that's a strong argument for whether it should be done again.

Look at the end state of the US auto industry. It's uncompetitive in basically every part of the world and thus basically irrelevant, except in the US. Unless somehow something different is going to happen here, this could end up with Intel continuing to perform poorly, negating the point of keeping it alive to begin with.

> Didn't we already cross this particular Rubicon during the auto bailout a decade ago?

We nationalised passenger rail in the 60s.

  > could not generate sufficient revenue to pay back the loans

Governments aren't people. If I gift you money, that money doesn't come back to me. But if a government gifts someone money, it makes its way back. As long as that money gets spent, there's returns. Even if you die, and even if you don't have that $14m for the death tax, that money still pays dividends back.

The only way it doesn't is if the economy crumbles or that money is taken out of the entire economy (which is much harder to do considering the dollar being the current global currency). So basically you need to light it on fire.

You can do things to slow that flow but it does come back. A low interest loan is just increasing that flow and this is why a negative interest rate can still generate a return. A company can fail and there'd still be returns through taxes in the mean time. The money doesn't just evaporate.

I think a lot conversations about money get weird because we over generalize what money means, applying money's context for an average person more broadly. But money has a very different context when you're talking about governments, corporations, or even billionaires (due to the shear amount). Nor are those examples the same either.

In this case I think it matters. The government already has a stake in Intel, and in all companies. Shares only decrease the pie available to the public while increases the ability for government official to do insider trading and increases nationalization.

Yes, but no. The bailout was companies that were headed for bankruptcy. Is Intel? My impression is that they're a lot further from it than GM and Chrysler were.

This isn't a bailout, though. It's strong-arming.

Did you look at this headline?

“The Chips Act wasn’t about raising revenue, and an equity share wouldn’t enhance national security.”

Every generation of fab is increasingly expensive. TSMC has over 500 customers, including Intel. Intel basically only has Intel to pay for those $20 billion fabs.

What happened to Intel? Did they need a bailout?

Indeed, the US has a long and storied history of privatizing riches and socializing losses.

I think the government bailout saved tesla a few years ago.

(Now they can meet their end by footshoots like removing the turn signal and drive select stalks)

> government intervened to stabilize a critical industry, avoiding systemic collapse that surely would have ...

I guess we'll never know what would have, no matter how sure you seem to be.

I, for one, am still a little bitter about what could have been if not for a couple of those bailouts.

Communism with extra steps