Why The Bailout is not Really a Bailout

While the term seems to be popular in the media, this "bailout" is technically nothing of the kind. Here are the reasons why the corporations are not really getting away with as much as you might think, and why it's not quite the end of the world everyone seems to think it is:


- Just punishment: The companies themselves are the ones enduring the loss, not the government. The government is buying the shares at below normal cost right now. So the tax payers (by proxy) are getting the shares at bargain rates. The current stock holders will end up being the final losers.

- No golden parachutes. There is a cap on how much compensation departing CEOs can get.

- The companies will not just disappear. They will continue to function as they did before. It is likely that they will increase in value over time. While no investment is risk free, this investment is extremely low risk. In the end the American People stand to lose little or nothing (and may even make a profit), while averting a potentially devastating economic disaster.

- The government is not running these companies. The shares the government is purchasing will not have voting rights. Since they dont have voting rights, the companies are, in essence, still private companies. Decisions will still be made by the voting shareholders.

- Ultimately, this is not a sign that America is finally degenerating into socialism, since it will not be ongoing. The government has no intention of maintaining permanent ownership...just recouping it's investment. The bill includes provisions that will mandate that the assets be sold at a future date.

- No one is being forced to sell their shares. The bill simply authorizes the Treasury Dept to purchase the shares available. It does not compel anyone to sell them.

There are still a lot of things I don't like about the bill. Congress managed to stuff billions more pork into it to get it to pass. If I can find the details of exactly who was responsible for this added pork (from either party), I will be posting them here shortly.

Yes, I am a free market capitalist. I believe that capitalism works best with as little government interference as possible. But while I originally opposed this bailout, I have to reluctantly admit that I can see why it was necessary. The alternatives were worse, and we have to work with what we've got.