6+ Questions About the Government's Stake In Those Bailed-Out Companies

Here’s the biggest question I have about all these 79.9% stakes the government is taking in various companies: What happens to these stakes?

1. What will the government do in terms of exercising control? How heavy handed will the government be in forcing the businesses out of risky business lines?

2. How will these G.O.E.S.’s be disposed of? Who determines the price? When do the people sell? How do they get their money back? Is there a targeted return? Does the government even have to sell?

3. How will the conflicts of managing private businesses be managed? For example, if the government starts playing favorites when it comes to making discretionary regulatory decisions, potentially in the name of protecting it’s investment, then it’s a huge potential problem for the players in the same space that are healthy.

4. Speaking of which, what duty does the government have to protect its investment?

5. How do we avoid people getting rich off of the taxpayers’ money? What kind of compensation controls will the government seek to impose?

6. If these companies exist, can they still employ lobbyists (Fannie (FNM) and Freddie (FRE) don’t, but I saw nothing about AIG (AIG) being banned from lobbying)? Why should they be allowed to continue lobbying? (Why these companies shouldn’t be allowed to continue lobbying is left as a simple exercise for the reader.)

Seems like Hank Paulson has just gone out and taken over a bunch of companies. Didn’t anyone ask what his plan was? Well, except of course buying the rest of them too…

Disclosure: None

Comments

[whidbey:]

You are bickering with the grander plan? Grow up for gods sakes. Sure there will be abuse, fraud and waste; this is America. And we know that it will benefit those who feel benefited, and begger those too stupid to know what is valuable. We are seeking the gesture not the substances. This is a trouble making post and in the new government it will be forbidben! hold two electric wires in your hands.

2008 Oct 04 05:20 PM

[phil from E...:]

Dear John Thain, I think you are right to question what happens next. It seems we are nationalizing a bunch of debt. It only works if the federal government is not asked to pay it off( to China, Russia or Saudi Arabia) or we inflate the dollar. The best path is to reduce the trade deficit. To do that we need to reduce oil imports and get other nations to buy our products that are competitive in the world market.
The worse thing is to try and stimulate an area of our economy into another bubble.

2008 Oct 04 06:49 PM

[djsunshine:]

Should be gradualy sold off or gifted to every tax payer in the country. They can decide if they want to keep it or sell it off..Contol freaks would be scare..do not under estimate joe six pack..

2008 Oct 05 01:58 PM

[Rumpole:]

"...It only works if the federal government
is not asked to pay it off( to China, Russia or Saudi Arabia)...": It seems like America is deathly afraid of China etc. starting to dump its paper on to the market. Wouldn't this be the perfect time for China to lean on this and force the redemption of its U.S. paper in gold?? Quite the way to lighten up the load at Fort Knox!

2008 Oct 05 02:04 PM