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Why bailout? Why not nationalize it instead and hopefully privatize it back later down the road. Or if you don’t want the nationalization headache at least trad
by jdmoreira 7y ago
Why bailout?
Why not nationalize it instead and hopefully privatize it back later down the road.
Or if you don’t want the nationalization headache at least trade money for equity.
- dragonwriter 7y ago> Why bailout? Why not nationalize it instead and hopefully privatize it back later down the road. That's not an alternative to a bailout, its a common bailout method: the government purchases equity of an ailing institution, thereby nationalizing it in whole or in part, puts it's own management in place, turns it around, and then sells the equity on the open market.
- jdmoreira 7y agoThanks for explaining. I thought bailout meant just giving away money or some low interest credit to companies without getting equity in return.
- extralego 7y agoI used to think the same. Good article here with a bit more detail! https://www.peoplespolicyproject.org/2020/03/23/how-to-think-about-corporate-bailouts-correctly/ https://www.peoplespolicyproject.org/2020/03/23/how-to-think...
- unlinked_dll 7y agoAlso worth noting the equity they get dilutes existing equity meaning it tends to screw the shareholders (but not as bad as insolvency). This is a good thing when you bail out companies that messed up. If you have a stake in a company you shouldn't ever want a bailout. I really think that the government should be taking a majority stake in Boeing. They have institutional problems in addition to money problems.
- m0zg 7y agoIn fact Boeing seems to be balking at govt requiring equity in exchange for loans: https://www.fool.com/investing/2020/03/24/boeing-ceo-rejects-talk-of-government-equity-stake.aspx https://www.fool.com/investing/2020/03/24/boeing-ceo-rejects... Which, to me, sounds like Boeing doesn't need a bailout all that much.
- rmrfstar 7y ago> That's not an alternative to a bailout, its a common bailout method When and where has a government made a large equity investment in a company and recouped its investment plus a reasonable insurance premium? Here are some examples where it has not: Penn Central Railroad 1970 Savings and Loan Crisis 1989 California Energy Sector 2000 Airline Industry 2001 Banking Sector 2008 Auto Sector 2008 If you want a non-comprehensive primer, see [1]. [1] https://www.propublica.org/article/government-bailouts https://www.propublica.org/article/government-bailouts