Bailout musings
My initial thoughts about the government bailout of banks: privatized profits and socialized risk. So let them face the consequences of bad decisions and bad bets.
Then I get these nagging thoughts….about all the consequences if we do let the banks go under…..I realize there is a lot of information I don’t have access to as an armchair economist…so I can’t fully assess the consequences of bank failure.
So, I hedge my principled stand with this idea. The government announces that it will invest in banks, but only as matching funds to private investments in banks. So for example, if Warren Buffet or a Japanese company invests 50 million in a bank, then the government matches it with $50 million.
Half of the government investments are in common stock (to retain some influence in decision making) and half are in preferred stock (to get better payback).
If no private capital comes forward, then what…bankruptcy or maybe consider a government take over (A temporary state takeover to lead it through a bankruptcy like process).
Who's influenced my thinking: Greg Mankiw’s idea on bank recapitalization, Jonathan Carmel’s recent article in Economists’ Voice, and various other pundits, bloggers, and friends.
Then I get these nagging thoughts….about all the consequences if we do let the banks go under…..I realize there is a lot of information I don’t have access to as an armchair economist…so I can’t fully assess the consequences of bank failure.
So, I hedge my principled stand with this idea. The government announces that it will invest in banks, but only as matching funds to private investments in banks. So for example, if Warren Buffet or a Japanese company invests 50 million in a bank, then the government matches it with $50 million.
Half of the government investments are in common stock (to retain some influence in decision making) and half are in preferred stock (to get better payback).
If no private capital comes forward, then what…bankruptcy or maybe consider a government take over (A temporary state takeover to lead it through a bankruptcy like process).
Who's influenced my thinking: Greg Mankiw’s idea on bank recapitalization, Jonathan Carmel’s recent article in Economists’ Voice, and various other pundits, bloggers, and friends.