Friday, April 24, 2009
What to do when Uncle Sam asks?
When the government starts making decisions for our banks and financial institutions (or our auto companies or anyone else) we have nothing but problems. First who does the CEO owe his allegiance to, the U.S. government or his shareholders? Second, should the government be in a position to force a stock-holder owned business to do something contrary to its interest?
There is an interesting Washington Post Article about this today as regards Bank of America and Merrill Lynch at: http://www.washingtonpost.com/wp-dyn/content/article/2009/04/23/AR2009042302461_pf.html
But this is just one example. Even as we speak, the federal government is trying to tell the bankers for Cerberus (Chrysler) that they need to give up secured positions in bankruptcy for common stock (worth maybe a third of the banks' secured value now). So you have the federal government telling banks that they now have a financial interest in to basically due something detrimental to their stockholders in order to help prop up another business (Chrysler) which the government will end up owning part of after a structured bankruptcy. How does that make sense?
IN A NORMAL CAPITALIST SOCIETY PEOPLE WOULD GO TO JAIL FOR THIS.