5 ms·

Wouldn't it make the most sense then for the Bailout to be mostly for equity at the current price? They have stock, they want cash, they sell the stock. Ameri

by basch 7y ago

Wouldn't it make the most sense then for the Bailout to be mostly for equity at the current price? They have stock, they want cash, they sell the stock. American Taxpayer holds onto the stock for a while, fixes the company, and then sells for profit. That of course is if the American Taxpayer wants to save that business.

mantap 7y ago
Sells for profit to who? The "american taxpayer" isn't a person, the taxpayer is the economy. The taxpayer is every business and most individuals. Yes buybacks were dumb. It's done now. Just change the regs and make sure it never happens again.
- basch 7y ago
  The last bundle of financial bailouts included the Government taking an equity position in companies. They made profit when they sold the stock. One example is the ownership stake they took in Citigroup. https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/ >The main sources of that revenue are $23.1 billion through dividend or interest payments, $19.7 billion from sales of equity or other assets that Treasury acquired (mostly stock in Citigroup); and $9.63 billion through stock warrants which Treasury received as part of most of the investments. When companies pay back the TARP investment, the warrants are either sold back to the company or auctioned off.
  - mantap 7y ago
    Such numbers are purely notional. Governments are not judged based on profit or loss, particularly the US government because of the special status of the dollar (in times of crisis people want USD or USD bonds). Governments are judged based on the strength of their economy which requires a holistic approach. "Making a profit" does absolutely nothing for any of the economic indicators that governments are judged on, such as employment, GDP PPP, etc
asdfasgasdgasdg 7y ago
I think this is the answer. If they want additional runway, they should dilute. It's fine for the government to act as a buyer of last resort in the event that it believes the market is responding irrationally. But it should still get a steep discount. The government can sell the assets back into the market when it believes the situation has stabilized.
- erentz 7y ago
  Maybe don’t sell it but put the holdings into a big sovereign wealth fund? The wealth fund can rebalance its holdings later, and can work as an infrastructure bank or similar in future to support the country’s ongoing development.
  - asdfasgasdgasdg 7y ago
    I don't know. Maybe. In general I'd prefer the government to hold debts than assets, especially when debt is so cheap as it is today. I don't want to see long-term crowding out of private investment. I think the investment system generally works pretty OK, except for in extreme circumstances like this.
    - basch 7y ago
      If the government is going to play kingmaker and choose which business succeed and fail, the profit for those moves should go back to the government, not just the old shareholders. >I don't want to see long-term crowding out of private investment. This really wouldnt be that different than Blackrock and Vanguard and State Street controlling like 10% of the market, except the government wouldnt be a passive investor, they would exert some form of control over controlled companies. It almost seems like cheat mode, for the government to say "we wont let this undervalued stock collapse, watch us save it. now its worth more (naturally because we saved it.) profit."
      - asdfasgasdgasdg 7y ago
        > the profit for those moves should go back to the government, not just the old shareholders If the government buys the assets at distressed prices and sells them at ordinary prices, it would?
im3w1l 7y ago
This seems like a logical solution to me. It's gonna look funny though, between government owning all the companies and handing out $1000 to all Americans, Trump will be the surprise socialist candidate.
charwalker 7y ago
That is basically how the 2008 auto bailout worked. Taxpayers profited off that too.

by basch 7y ago

mantap 7y ago

Sells for profit to who? The "american taxpayer" isn't a person, the taxpayer is the economy. The taxpayer is every business and most individuals. Yes buybacks were dumb. It's done now. Just change the regs and make sure it never happens again.

basch 7y ago
The last bundle of financial bailouts included the Government taking an equity position in companies. They made profit when they sold the stock. One example is the ownership stake they took in Citigroup. https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/ >The main sources of that revenue are $23.1 billion through dividend or interest payments, $19.7 billion from sales of equity or other assets that Treasury acquired (mostly stock in Citigroup); and $9.63 billion through stock warrants which Treasury received as part of most of the investments. When companies pay back the TARP investment, the warrants are either sold back to the company or auctioned off.
- mantap 7y ago
  Such numbers are purely notional. Governments are not judged based on profit or loss, particularly the US government because of the special status of the dollar (in times of crisis people want USD or USD bonds). Governments are judged based on the strength of their economy which requires a holistic approach. "Making a profit" does absolutely nothing for any of the economic indicators that governments are judged on, such as employment, GDP PPP, etc

asdfasgasdgasdg 7y ago

I think this is the answer. If they want additional runway, they should dilute. It's fine for the government to act as a buyer of last resort in the event that it believes the market is responding irrationally. But it should still get a steep discount. The government can sell the assets back into the market when it believes the situation has stabilized.

erentz 7y ago
Maybe don’t sell it but put the holdings into a big sovereign wealth fund? The wealth fund can rebalance its holdings later, and can work as an infrastructure bank or similar in future to support the country’s ongoing development.
- asdfasgasdgasdg 7y ago
  I don't know. Maybe. In general I'd prefer the government to hold debts than assets, especially when debt is so cheap as it is today. I don't want to see long-term crowding out of private investment. I think the investment system generally works pretty OK, except for in extreme circumstances like this.
  - basch 7y ago
    If the government is going to play kingmaker and choose which business succeed and fail, the profit for those moves should go back to the government, not just the old shareholders. >I don't want to see long-term crowding out of private investment. This really wouldnt be that different than Blackrock and Vanguard and State Street controlling like 10% of the market, except the government wouldnt be a passive investor, they would exert some form of control over controlled companies. It almost seems like cheat mode, for the government to say "we wont let this undervalued stock collapse, watch us save it. now its worth more (naturally because we saved it.) profit."
    - asdfasgasdgasdg 7y ago
      > the profit for those moves should go back to the government, not just the old shareholders If the government buys the assets at distressed prices and sells them at ordinary prices, it would?

im3w1l 7y ago

This seems like a logical solution to me. It's gonna look funny though, between government owning all the companies and handing out $1000 to all Americans, Trump will be the surprise socialist candidate.

charwalker 7y ago

That is basically how the 2008 auto bailout worked. Taxpayers profited off that too.