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EDITORIAL: Nationalizing business

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President Obama bragged yesterday that "we've begun the work of remaking America." A big part of that project is nationalizing American industries.

The government has increased ownership and control over companies with brute force. Banks that refused to take money from the government found themselves threatened with costly public audits until they changed their mind. Regulatory threats were used to force them to take government money when they didn't want it. Next, those banks found the government using the leverage from these loans to force financial institutions to sell stock to the government.

Bank of America was coerced into buying Merrill Lynch. When Bank of America CEO Ken Lewis learned that Merrill's financial condition was much worse than he had been led to believe, he tried to exercise his legal option to back out of the shotgun merger. Despite the discovery that Merrill had lost $15 billion during the last three months of 2008 alone, then-Treasury Secretary Henry Paulson used the threat of firing BOA's CEO and board of directors to force through the merger.

The apparent cycle is that government forced banks to lose money and then used those losses to take additional control of the banks. It is not clear that Bank of America's losses were due to what Mr. Obama calls "a failure to regulate."

The government has used its ownership in the banks to help engineer its takeover of General Motors. Creditors, such as the banks, were given short shrift while the government and unions got the vast majority of the ownership stake in the restructured GM. In real bankruptcy, a company would have been liquidated for the benefit of its creditors, not for the benefit of its workers. The government's control over banks such as J.P. Morgan Chase & Co. and Citigroup Inc. caused them to agree to lose this money.

None of the takeovers have included any guarantees of eventually selling off these companies so we don't know if government control is intended to be temporary. This is scary because the financial and automobile industries are just the beginning. Nationalization of health care is next on the agenda.

Nationalization is bad for the economy and provides consumers worse service because government is less efficient than private industry. This is remaking America the wrong way.

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