Posted tagged ‘Equity Stake’

GOES: Government Owned Equity Stake. What could GOES wrong?

October 4, 2008

Here’s the biggest question I have about all these 79.9% stakes the government is taking in various companies: what happens to these stakes?

1. What will the government do in terms of exercising control? How heavy handed will the government be in forcing the businesses out of risky business lines?

2. How will these G.O.E.S.’s be disposed of? Who determines the price? When do the people sell? How do they get their money back? Is there a targeted return? Does the government even have to sell?

3. How will the conflicts of managing private businesses be managed? For example, if the government starts playing favorites when it comes to making discretionary regulatory decisions, potentially in the name of protecting it’s investment, then it’s a huge potential problem for the players in the same space that are healthy.

4. Speaking of which, what duty does the government have to protect it’s investment?

5. How do we avoid people getting rich off of the taxpayers’ money? What kind of compensation controls will the government seek to impose?

6. If these companies exist can they still employ lobbyists (Fannie and Freddie don’t, but I saw nothing about AIG being banned from lobbying)? Why should they be allowed to continue lobbying? (Why these companies shouldn’t be allowed to continue lobbying is left as a simple exercise for the reader.)

Seems like Hank Paulson has just gone out and taken over a bunch of companies. Didn’t anyone ask what his plan was? Well, except of course buying the rest of them too…