Posts
This article discusses the US Government's 3rd bailout of Citigroup about a month ago. It brings up an interesting discussion of nationalization vs. bailouts.
From the article:
"'The government is bending over backwards to not go along the lines of nationalization,' said Bernie Sussman, chief investment officer of Spectrum Asset Management, a unit of Principal Financial Group Inc. that manages about $6.9 billion in assets. 'They had the alternative to completely zero out the common stock.'"
Are bailouts the best way to fix these banks that we cannot allow to fail? The article notes that the government is making a lot of concessions that are in the best interest of the bank. On the other hand, the article notes:
"Wall Street also is worried about 'whether the company will be run in the interest of private shareholders or for the public good,' said John McDonald, a banking analyst at Sanford Bernstein & Co. 'It's a valid question what the priorities will look like.'"
Should Citigroup be run in the interest of the shareholders or the public good? What is best for our economy? Thoughts on nationalization vs. bailouts?
http://online.wsj.com/article/SB123573611480193881.html
Subscribe to:
Post Comments (Atom)
Personally, I do not agree with either nationalalization nor government bailout. I believe that companies should live or die on their own merit. Getting the government involved in any capacity complicates the interests of the company.
ReplyDeleteI agree with Chloe. Both nationalization and government bailouts can lead to the exploitation of companies and individuals. Specifically, if banks become intertwined in government operations taxpayers are exposed to the risk. Additionally, there is a tremendous amount of corruption in the government and politicians have the incentive to act in ways which benefit their political causes rather than stockholder interests. (I do understand that not all politicians are corrupt)
ReplyDeleteThere is a lot of corruption, period. I think we will see that the line between public sector and private sector is fairly arbitrary and has been for quite a while.
ReplyDeleteI think that nationalization puts the government into a position of running a business that they know nothing about and the result is something like the fannie-mae freddie-mac situation in the housing/mortgage sector. Why can't the federal government loan money like any one else does? Set terms, charge interest and if the bank can't pay you seize their assets and liquify them to collect the debt. Its highly problematic if the bank fails but then the government could parcel the assets and sell them to other firms willing to take on the risk.
ReplyDeleteI just wanted to see what people thought when it was announced two days ago that in the month of March the United States gained 162,000 jobs. I know this isn't that many jobs in the whole scheme of things but I think it does show promise.
ReplyDeleteHere is an article that talks about it as well.
ReplyDeletehttp://www2.timesdispatch.com/rtd/business/national_international/article/ECON03_20100402-223208/334885/
I haven't thought about the position of neither nationalization nor bailouts, as Chloe suggested. It really makes sense though. Let the companies struggle or succeed on their own terms. Just because they're larger doesn't mean they must survive at whatever cost. When smaller firms are in trouble they generally go bankrupt and close up shop. Leave the market to work on its own...everything will find it's own way of working out if left to the market structure (at least that's what I picked up from our theory of the firm class...)
ReplyDelete