American voters didn’t get to decide on the bailouts, but common stock shareholders of these big banks will be asked to approve these preferred stock issues to the government. They’ll vote “yes” for the big handouts. It’s far better for them than bankruptcy. Will the preferred stock be voting stock? Will the government get to select some board members? Probably yes. Providing money without strings attached is very unlikely. Will bank boards be enlarged?
If the government gets to choose some board members, that’s bad. The government will be running the banks. It’s nationalization of the banks. By the way, whom would they choose, someone from the government or someone from Wall Street? Some of each? If no one from Treasury sits on bank boards, that’s bad too.
If the big banks need capital, it is because they made big losses on their loans. Why should taxpayers make good these loans? Why privilege the unproductive and tax the productive? Right and left, the government is rewriting contracts ex post facto. Why provide ex post insurance at taxpayer expense to business failures? Why subsidize inept and inefficient banks? Why privilege the biggest losers?
2:55 am on October 14, 2008
