Bailouts should be no fun

I wrote here before that it is my belief that if politicians are going to "invest" taxpayer dollars they should "invest" like a professional investor would do so. Throwing good money after bad just won't work. Right now, the only thing the bailout is likely to accomplish is push back the inevitable with companies like AIG, Citicorp, GM and Chrysler--bankruptcy. When in history did rewarding incompetent Boards of Directors and management teams with capital work? Isn't this what they do with state owned companies under socialism?

Under the capitalistic system it is the Board of Directors that is responsible for protecting the shareholder interests. How many time have you heard a politician say we should throw out the Board? If we are making major investments in public companies shouldn't we, the taxpayers, be getting Board seats or even Board control. This is a most fundamental principle in capitalism. How many times have you seen a very savvy, smart investor, trying to get Board control of a company so he could reorganize the company and help it function better in a competitive environment?

They put some perspective into bailouts over on Econbrowser.
Bailouts should be no fun

How do you solve the problem of unpayable existing obligations of institutions that otherwise have the resources to make a productive contribution to total economic surplus? That of course is the function that our bankruptcy system is intended to provide. In a typical bankruptcy, the company's owners and senior management get wiped out, some crumbs are left for creditors and workers, and hopefully the most valuable underlying assets get reallocated to alternative productive use.

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