Government Investment in Banks: Creeping Nationalization or Prudent, Temporary Aid?

Abstract

This Article explores government investment in banks and discusses some of the implications of the investments. In addition to detailing government bank stock investment during the current financial crisis, the article recounts the government’s prior extensive investment in preferred stock of banks during the Great Depression through the Reconstruction Finance Corporation and the government’s investment in one large bank, the Continental Illinois National bank, to prevent its failure in 1984. The implications of government investments in banks are explored first through the lends of history and then considering the current objections and concerns raised about creeping government nationalization of banks.