Tuesday, September 23, 2008

In the History of Bad Ideas

This one has to be up there:

Paulson was in talks with Democrats about their proposal that the government be able to purchase equity in faltering companies as part of the plan, so taxpayers could benefit from future profits.

Giving government further incentive to manipulate, meld, twist and generally distort the market is a bad, bad, bad idea.  Imagine that a company comes along that is better for consumers in every way to one of these “bailed out” companies – Company A.  It will start making more money than Company A, Company A’s bottom line starts to suffer.

Does Congress just sit idly by while its revenue stream is effected?  Will Congress just let Company A slowly perish?  I’m agnostic as to whether saving Company A is the right thing to do.  It is possible that Company A is too important right now to let it just collapse, but it doesn’t always have to be that way.  What sort of distortions will occur if Congress is a part owner in Company A?  Does Congress get to pick the CEO?  Or Board of Directors?  Will there be a quid pro quo?  “We’ll support you as Chairman if you stump for Obama in ‘12”

I can think of nothing more unappealing than giving Congress a vested interest in the running of any specific company – business is too political as it is.

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