Can the US Government Own American Companies?

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The American economy runs on private enterprise, but under specific circumstances, the federal government can and does seize control of private companies.

This power comes from multiple legal authorities, constitutional provisions, and historical precedents that allow the government to take partial or complete control of businesses.

These takeovers happen for various reasons: building critical infrastructure, preventing economic collapse, punishing criminal activity, or mobilizing industrial capacity during wartime.

The government’s authority ranges from permanent seizure through eminent domain to temporary operational control during national emergencies.

Five Ways Government Takes Control

Table 1: Mechanisms of Federal Government Takeover of Private Companies

Eminent Domain: Taking Property for Public Use

The most direct power the government has to take private property is eminent domain. This authority allows federal, state, and local governments to acquire property from private owners, even against their will, for public purposes. While typically used for land acquisition for highways or parks, this power extends to taking business property.

Constitutional Foundation

Eminent domain isn’t explicitly granted by the Constitution but is recognized as an inherent attribute of sovereignty. The Fifth Amendment’s Takings Clause limits this power: “nor shall private property be taken for public use, without just compensation.” This restriction originally applied only to the federal government, but the Fourteenth Amendment extended these protections to state and local governments.

Defining “Public Use”

The interpretation of “public use” has evolved dramatically over time. Historically, it meant property had to be physically used by the general public—roads, government buildings, military installations, and utilities.

This narrow view began shifting in the mid-20th century. In Berman v. Parker (1954), the Supreme Court upheld urban renewal programs that allowed government to condemn “blighted” property and transfer it to private developers, arguing that clearing blight served a public purpose.

The evolution culminated in Kelo v. City of New London (2005). In a controversial 5-4 decision, the Court ruled that New London, Connecticut, could use eminent domain to seize non-blighted private homes and transfer them to a private developer. The Court reasoned that economic development projected to create jobs and increase tax revenues qualified as “public use” because it would benefit the community.

The Kelo decision sparked massive public backlash. Many saw it as dangerous government overreach favoring wealthy developers over ordinary property owners. At least 43 states responded by passing new laws or amending their constitutions to provide stronger property owner protections, often explicitly prohibiting eminent domain for economic development or private gain.

The Problem with “Just Compensation”

The Constitution requires “just compensation,” which courts define as “fair market value”—what a willing but unpressured buyer would pay a willing but unpressured seller.

This standard often fails to fully compensate business owners. Fair market value typically covers appraised real estate and buildings but doesn’t account for intangible assets critical to business success:

Lost Profits: Income the business would have generated if not forced to close or relocate.

Goodwill: Value of the business’s reputation and customer base, often built over years.

Relocation Costs: Significant expenses of moving an entire enterprise.

Sentimental Value: Personal attachment to the property.

A business is more than physical assets. Its value ties to location, history, and community relationships. By focusing solely on appraised property value, “just compensation” can leave business owners with payments that are constitutionally “just” but economically insufficient to make their enterprise whole.

Regulatory Takings

Government doesn’t need to physically seize property to trigger Fifth Amendment compensation requirements. A “regulatory taking” occurs when regulations restrict property use so severely they constitute a taking. This concept, first recognized by the Supreme Court in 1922, acknowledges that regulations can go “too far” and become functionally equivalent to direct appropriation.

Courts identify two “per se” takings requiring automatic compensation:

Permanent Physical Occupation: If regulations require property owners to submit to permanent physical invasion, no matter how minor, it’s a taking. In Loretto v. Teleprompter Manhattan CATV Corp., the Court found that laws requiring landlords to allow cable companies to install small boxes on buildings constituted takings.

Denial of All Economically Viable Use: If regulations deprive property of all economically viable use, owners must be compensated.

For other cases, courts apply the Penn Central test, weighing three factors:

• Economic impact of the regulation
• Interference with investment-backed expectations
• Character of the governmental action

Financial Crisis and Bailouts

During severe economic distress, the federal government has repeatedly intervened to rescue private companies from collapse. These interventions, known as “bailouts,” aim to prevent catastrophic failures that could destabilize the entire economy—mitigating “systemic risk.”

While bailouts often begin as loans or guarantees, they can transform government into significant, sometimes majority, owners of private corporations.

The “Too Big to Fail” Rationale

Government bailouts provide financial assistance to companies or industries on the brink of failure. The primary justification is that certain large, interconnected entities are “too big to fail”—their collapse could trigger widespread job losses, frozen credit markets, and deep recession.

This practice dates to Treasury Secretary Alexander Hamilton’s intervention during the Panic of 1792. Recent examples include airline industry assistance after September 11th, massive 2008 financial crisis interventions, and COVID-19 pandemic business support.

From Loan to Ownership

When government provides billions in taxpayer dollars to failing companies, it often demands ownership stakes in return. This serves two purposes: giving taxpayers potential financial returns if companies recover, and providing government leverage to demand restructuring and management changes.

Government ownership takes several forms:

Common Stock: Direct ownership interest typically carrying voting rights, allowing government participation in major corporate decisions.

Preferred Stock: Higher claim on assets and earnings than common stock, often paying fixed dividends but lacking voting rights. Companies may issue preferred stock to government during crises because it can be done quickly without shareholder approval.

Warrants: Options giving government rights to purchase company stock at predetermined prices later, often included in bailout packages to provide additional taxpayer upside.

Golden Shares: Special stock class giving holders veto power over major corporate decisions like mergers or asset sales, regardless of economic stake size. This allows government to retain significant control without majority ownership.

The 2008 Auto Industry Bailout

The 2008 financial crisis pushed American automakers to the brink. General Motors and Chrysler, burdened by high labor costs and plummeting sales, faced liquidation.

The Intervention: Believing these companies’ failures would devastate manufacturing and cost millions of jobs, the Bush and Obama administrations provided $85 billion in assistance through the Troubled Asset Relief Program (TARP). General Motors alone received over $50 billion.

Government as Majority Owner: This wasn’t a simple loan. Government used financial leverage to force GM into structured bankruptcy. Old company shareholders were wiped out, and “New GM” emerged. In exchange for its investment, the U.S. Treasury received 60.8% equity stake, making federal government the majority owner. Remaining shares went to the Canadian government, UAW retiree health trust, and old company bondholders.

The Outcome: Government aimed to exit ownership as soon as practical. It began selling GM shares in the company’s 2010 initial public offering and completed stock sales in December 2013. While intervention is credited with saving the company and industry, it cost taxpayers approximately $10.5 billion in net losses on the GM bailout.

The GM bailout illustrates powerful, temporary nationalization. Government didn’t merely provide loans—it used its position as the only available lender to direct bankruptcy, erase old ownership claims, negotiate new labor terms, and install new corporate structure with itself as controlling shareholder.

The AIG Rescue

At the 2008 crisis height, American International Group (AIG), the world’s largest insurance company, verged on collapse. Its failure, driven by massive losses on credit default swaps, threatened the entire global financial system.

The Intervention: To prevent systemic meltdown, the Federal Reserve and Treasury mounted unprecedented rescue, ultimately committing $182 billion in loans, asset purchases, and capital injections.

Government as 92% Owner: In return for this massive capital infusion, government received preferred stock and warrants eventually converted into 92.1% common stock ownership, giving near-total company control.

The Outcome: Under government oversight, AIG underwent dramatic restructuring, selling non-core assets to repay debt. Government began selling AIG shares in 2011 and divested final stakes in December 2012. Unlike the auto bailout, AIG rescue proved profitable, generating $22.7 billion in net positive returns for taxpayers.

The Bailout Debate

Government bailouts remain among the most controversial economic policy tools. Proponents argue they’re necessary evils during crises, preventing mass unemployment and deeper depressions by stabilizing critical industries.

Critics raise several powerful objections:

Moral Hazard: Bailing out companies encourages excessive future risk-taking, knowing taxpayers will bear failure costs.

Fairness Questions: Why should taxpayer money rescue mismanaged private firms, particularly when executives often face few personal consequences?

Conflicts of Interest: When government becomes major shareholder, it faces fundamental conflicts. As shareholder, its goal is maximizing investment value for taxpayers. As regulator, its duty is broader public good, which may require enforcing policies that reduce company short-term profitability.

This tension means government cannot act as purely commercial investor, complicating corporate governance and ultimate financial returns.

Strategic Investments as Industrial Policy

Beyond crisis-driven bailouts, the federal government has begun using equity stakes as proactive industrial policy tools. This represents a significant shift from rescuing failing companies to strategically investing in healthy ones to advance national priorities like bolstering domestic supply chains and maintaining technological leadership.

The Intel Equity Stake

A prime example of this new strategy is the U.S. government’s acquisition of a stake in semiconductor giant Intel in August 2025.

Context: Once the undisputed industry leader, Intel had been struggling financially, posting significant losses while falling behind competitors in key areas like AI. Simultaneously, through the CHIPS and Science Act, the U.S. was providing billions in subsidies to incentivize companies to build semiconductor fabrication plants on American soil, reducing reliance on foreign manufacturing, particularly Taiwan.

The Intervention: The Trump administration announced it would acquire nearly 10% of Intel. The deal followed a dramatic reversal in the administration’s stance toward Intel CEO Lip-Bu Tan, whom the president had previously urged to resign over past Chinese firm ties.

Deal Mechanics: The $8.9 billion investment wasn’t new cash infusion. Instead, it converted $5.7 billion in previously awarded but unpaid CHIPS Act grants and $3.2 billion from the Secure Enclave program into equity. Government purchased 433.3 million shares at $20.47 per share, a significant market price discount.

Nature of Ownership: The agreement specified government’s stake is “passive,” carrying no board representation or special governance rights. Government also agreed to vote shares in line with company board on most matters. However, the deal includes five-year warrants allowing government to purchase additional 5% if Intel ceases owning at least 51% of its foundry business.

Debate: Proponents, including the Commerce Secretary, hailed the arrangement as converting subsidies into “equity for the American people,” giving taxpayers potential returns while advancing national security. Critics warned the move was a “slippery slope” toward nationalization that risks entangling politics with commercial decisions. Intel, in SEC filings, outlined risk factors including potential harm to international sales (76% of revenue) and limited ability to secure future government grants.

Government as Primary Customer: Defense Sector

A unique relationship exists between federal government and defense industry, where private corporations operate with government as principal, often near-exclusive, customer. This deep codependency creates dynamics distinct from other sectors and has led to discussions about more direct government involvement.

Lockheed Martin Case Study

Lockheed Martin exemplifies this relationship. While never fully nationalized, its history includes significant government intervention, and its current business model is inextricably linked to federal policy and spending.

Historical Precedent: In 1971, facing potential insolvency due to L-1011 TriStar airliner cost overruns, Lockheed sought and received $250 million federal loan guarantee. The Emergency Loan Guarantee Act intervention was justified on national security grounds and job loss risks.

Current Relationship: Today, Lockheed Martin’s business overwhelmingly depends on government contracts. In 2024, 73% of company revenue came from U.S. government, with 65% from Department of Defense alone. This reliance led Commerce Secretary Howard Lutnick to describe the company as “basically an arm of the U.S. government.”

Future Equity Stakes Discussion: Following the Intel deal, the Commerce Secretary publicly confirmed top Pentagon officials are “thinking about” taking equity stakes in major defense contractors, including Lockheed Martin. The rationale links to financing munitions acquisitions and the principle that if government provides the vast majority of company revenue, taxpayers should have more direct stakes.

Government Conservatorship

Distinct from permanent eminent domain takings and partial bailout ownership stakes, conservatorship allows government agencies to take temporary but total operational control of private companies. The goal isn’t permanent ownership or liquidation, but stabilizing finances, rehabilitating operations, and restoring companies to “sound and solvent condition.”

Defining Conservatorship

Conservatorship is a legal process where designated entities—”conservators”—are appointed to manage affairs of companies unable to manage themselves, typically due to severe financial distress. It’s a less extreme alternative to receivership, which liquidates company assets. Under conservatorship, companies continue day-to-day business, but management, board of directors, and shareholders lose authority, which transfers to government conservators.

Conservator Powers

Government conservator powers are sweeping. By statute, conservators immediately succeed to all “rights, titles, powers, and privileges” of companies and their stockholders, officers, and directors. Conservators can:

• Take over and operate companies
• Conduct all business and collect money due
• Preserve and conserve company assets

While conservators have ultimate authority, they typically delegate day-to-day operational responsibilities to existing management to ensure business continuity. Conservatorship is intended to end once overseeing agency directors determine companies have been successfully rehabilitated and restored to safe, solvent conditions.

Fannie Mae and Freddie Mac Conservatorships

The most prominent government conservatorship examples involve Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac).

Context: Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) playing central roles in U.S. housing markets by purchasing mortgages from lenders, packaging them into securities, and selling them to investors. By 2008, they owned or guaranteed over $5 trillion in home mortgage debt. During the subprime mortgage crisis, they suffered massive losses threatening solvency. Their collapse would have paralyzed U.S. housing finance.

The Intervention: Congress passed the Housing and Economic Recovery Act of 2008 (HERA), creating stronger regulator Federal Housing Finance Agency (FHFA) with explicit authority to place GSEs into conservatorship. On September 6, 2008, FHFA exercised this power, taking control of both entities. The stated purpose was preserving assets, restoring sound condition, and allowing continued mission fulfillment of providing mortgage market liquidity.

The Ongoing “Temporary” State: The conservatorships were designed as temporary emergency measures. However, more than fifteen years later, they remain in place. This unexpected longevity highlights how crisis management tools can become semi-permanent government control when there’s no political consensus on long-term solutions.

The underlying GSE structural flaw—hybrid public-private models privatizing profits while socializing risks—was the root failure cause. Because Congress cannot agree on new, stable secondary mortgage market structures, “temporary” conservatorships cannot end. The entities are too economically critical to liquidate but too flawed in original design to return to private markets. This creates policy limbo where government remains in control by default, transforming short-term fixes into indefinite nationalization.

Asset Forfeiture: Seizure as Crime Consequence

The federal government can take full ownership of private businesses through asset forfeiture. This mechanism differs fundamentally from those previously discussed. Its purpose isn’t economic stabilization, public utility, or national security—it’s a law enforcement tool designed to punish criminals and disrupt operations by seizing property and proceeds of illegal activity.

Law Enforcement Tool

Asset forfeiture allows government to seize property, including entire businesses, connected to crimes. The rationale is removing criminal tools and preventing profit from illicit acts. Forfeited assets can be sold, with proceeds often funding law enforcement activities or providing victim restitution.

Three Forfeiture Paths

Federal law provides three distinct forfeiture methods:

Criminal Forfeiture: Actions brought against persons as part of criminal prosecutions. To forfeit property under this process, government must first secure criminal convictions. Forfeiture then becomes part of defendants’ sentences.

Civil Judicial Forfeiture: Actions brought against property itself, not persons. This process doesn’t require criminal convictions. Instead, government files lawsuits against property, alleging criminal activity involvement. Government must prove this connection in court, typically by “preponderance of evidence”—lower than “beyond reasonable doubt” required for criminal convictions.

Administrative Forfeiture: Process allowing agencies to forfeit property without court involvement. It applies to certain property types, including cash and vehicles, valued at $500,000 or less. Agencies seize property and send owner notices. If owners don’t file contest claims within specific timeframes, property is automatically forfeited.

This framework, particularly civil forfeiture, creates controversial dynamics where business owners can lose companies without ever being convicted or formally charged with crimes. The legal fiction that property itself can be “guilty” shifts proof burdens and raises significant due process concerns.

Seizing Entire Businesses

These forfeiture laws can seize not just cars or cash, but entire commercial enterprises. For example, if motels are knowingly used to facilitate human trafficking, government can initiate forfeiture proceedings to seize entire properties. Similarly, if commercial buildings are used as money laundering operation fronts, buildings themselves can be forfeited.

Corporate Transparency Act

Government strategy for combating corporate crime has evolved from purely reactive to also proactive. While asset forfeiture is reactive—used after crimes occur—the Corporate Transparency Act (CTA), passed in 2021, is preventative.

The CTA requires many business entities to report “beneficial owners” information—actual individuals owning or controlling companies—to Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The primary goal is pulling back anonymity veils provided by shell corporations, often used by “malign actors” to conceal involvement in money laundering, terrorism financing, tax fraud, and other illicit activities.

By creating beneficial ownership information databases, the CTA makes it harder for criminal enterprises to operate anonymously and easier for law enforcement to “follow the money.” This represents significant strategic shifts from punishment after facts to prevention and surveillance, aiming to stop corporate structure misuse before it starts.

Wartime and Emergency Seizures

In times of war or grave national emergency, federal government powers expand significantly. This includes authority to take control of private industries deemed critical to national security and war efforts. This power is justified by necessity of mobilizing all national economic resources to face existential threats. However, this power’s scope, particularly Presidential authority to act without Congressional approval, has been tested and limited by the Supreme Court.

WWI Railroad Takeover

The most sweeping government takeover of an entire industry occurred during World War I.

Context: In 1917, the U.S. railroad system was chaotic. Comprised of nearly two hundred competing private corporations, the network was plagued by inefficiency and severe congestion. This gridlock hindered transport of troops, equipment, and vital supplies like coal, threatening to cripple war efforts.

The Intervention: Acting on authority granted by Congress in the 1916 Army Appropriations Act, President Woodrow Wilson nationalized nation’s railroads on December 26, 1917. He created United States Railroad Administration (USRA) to take over management and operation of the entire system. USRA consolidated lines, standardized equipment, and prioritized military traffic to ensure efficient movement of personnel and materiel.

Nature of Takeover: This highlights crucial distinctions between operational control and legal ownership. Government didn’t purchase railroads or seize their stock. Companies remained privately owned, and government paid compensation—essentially rental fees—for property use based on average income in years prior to takeover. The takeover was explicitly temporary emergency legislation and, despite union lobbying to make it permanent, railroads were returned to private control on March 1, 1920.

This model of temporarily commandeering industry operational capacity is less intrusive than full nationalization and serves as historical precedent for interventions stopping short of complete title transfers.

Korean War Steel Seizure Limits

Presidential emergency power limits were tested during the Korean War.

Context: In 1952, labor disputes between steel companies and unions threatened nationwide strikes that would halt all steel production. President Harry Truman, fearing steel shortages would jeopardize American troops fighting in Korea, issued executive orders directing Commerce Secretary to seize and operate nation’s steel mills.

Supreme Court Rebuke: Steel companies immediately challenged seizures in court. The case, Youngstown Sheet & Tube Co. v. Sawyer, quickly reached the Supreme Court. In landmark 6-3 decisions, the Court ruled President Truman’s seizures were unconstitutional. The Court held Presidents had no inherent constitutional power to seize private property, even in national emergencies. That power belonged to Congress. Presidential roles are executing Congressional laws, not making law themselves.

Constitutional Principle: The Youngstown case established vital separation of powers principles. Presidential power isn’t absolute. In influential concurring opinions, Justice Robert H. Jackson laid frameworks for analyzing presidential power that remain influential today. He argued Presidential authority is at maximum when acting with express or implied Congressional authorization. It’s in “zones of twilight” when Congress has been silent. But power is “at lowest ebb” when taking measures incompatible with expressed or implied Congressional will.

In this case, Congress had previously considered and rejected giving Presidents power to seize industries during labor disputes when passing the Taft-Hartley Act of 1947, placing Truman’s actions in this third, weakest category.

The juxtaposition of Congressionally-authorized WWI railroad takeover and unilateral Korean War steel seizure provides powerful lessons in U.S. checks and balances systems. It demonstrates government takeover legitimacy depends critically on which government branch is acting. Presidential power is at zenith when backed by Congress and at nadir when acting against its will.

Government Takeover Tools in Practice

The federal government’s ability to take control of private companies stems from multiple legal authorities, each serving different purposes and operating under different constraints. From the broad constitutional power of eminent domain to the specialized emergency authorities invoked during wartime, these mechanisms reflect the ongoing tension between private property rights and public necessity.

The evolution of these powers shows how government authority adapts to changing economic and security challenges. The expansion of “public use” in eminent domain cases, the development of bailout mechanisms during financial crises, and the emergence of strategic equity investments all demonstrate how legal frameworks evolve to meet new circumstances.

Recent examples like the Intel equity stake and discussions of defense contractor ownership suggest government intervention in private enterprise may be entering a new phase. Rather than responding to crises, government increasingly views ownership stakes as proactive tools for advancing national economic and security interests.

These powers remain controversial precisely because they challenge fundamental assumptions about the role of government in a market economy. While each mechanism has specific legal justifications and constraints, their collective scope represents significant government authority over private enterprise—authority that continues to evolve as economic and security challenges change.

The debate over these powers ultimately reflects deeper questions about the proper balance between individual property rights and collective public needs. As global economic competition intensifies and new security challenges emerge, this balance will likely continue to shift, making understanding of these mechanisms increasingly important for businesses, policymakers, and citizens alike.

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