Finance and Politics : The Wealth Effects of Special Interest Group Influence During the Nationalization and Privatization of Conrail

Conrail, nationalized in 1976 and privatized in 1987, was the most significant nationalization and privatization by the US government in recent years. It was created from six bankrupt railroads under the pressure of interest groups, formed by customers, existing claimants, employees and related companies. We document the gains and losses to these special interest groups at key points in the nationalized and privatized time periods. Over this period, the U.S. government had outlays of $6.59 billion, and cash inflow of $6.15 billion, and internal return of -6.4%. The paper provides evidence that a state owned firm with good governance could deliver superior performance