U.S. Is Finding Its Role in Business Hard to Unwind:
But one year after the collapse of Lehman Brothers set off a series of federal interventions, the government is the nation’s biggest lender, insurer, automaker and guarantor against risk for investors large and small.
Between financial rescue missions and the economic stimulus program, government spending accounts for a bigger share of the nation’s economy — 26 percent — than at any time since World War II. The government is financing 9 out of 10 new mortgages in the United States. If you buy a car from General Motors, you are buying from a company that is 60 percent owned by the government.
If you take out a car loan or run up your credit card, the chances are good that the government is financing both your debt and that of your bank.
And if you buy life insurance from the American International Group, you will be buying from a company that is almost 80 percent federally owned.
Daniel Yergen will have to write a new introduction to his classic book, The Commanding Heights: The Battle for the World Economy. Rather that a story of victory, it now reads like the lost cause….
This is somewhat misleading. Fundamentally, not *that much* has changed. It’s more that an informal, unspoken relationship has been formalized, acknowledged, made explicit, etc. The relationships were formed largely during the New Deal, and have cemented over the decades. The risk guarantees, and de facto government financing were always there. All the MDs at the major investment houses before the crisis, going back decades into the past, knew that the government basically guaranteed their risks.
Though I don’t take this mere formalization lightly. While it may not really be a major fundamental change, I think it’s quite clear by now that it has enough of an effect on PR and how the American demos and the rest of the world perceives the USG that certain rumblings can now be heard among the masses and legitimacy is being questioned from more places than the usual corners.