President Obama recently announced that he desires more robust regulation of banks, particularly as it relates to their size and the types of investments they can make. As reported, he is embracing Depression-era policies.
Be careful what you ask for.
This story highlights the problem we encounter when we decide as a society to bail out private corporations. As has been discussed here before, bailouts are inconsistent with founding principles. The irony is that, in a way, the Administration has a point. Once a private corporation accepts public money, the public becomes a constituent with an interest in how the company operates. Since the “government” acted as the public’s investment advisor (willingly or not on behalf of the public), these companies have the challenge of either paying the money back, and quickly, or answering to another master.
More problematic than the bailout itself is the fact that we have large imbalanced government making these decisions; the government in Washington D.C. was never intended to be a creditor to private companies. The proper thing to do is to let good managers and owners succeed and bad managers and owners fail. As we have said before: it is bad business supporting bad businesses. Yet, if a private business was so critical as to merit a bailout, the employees and communities most effected should be the parties to make that determination.
