The Public Policy
Bailout Ownership
We paid for the bailout, and we are entitled to own the proceeds.
If the American People are bailing out the banks and the big automobile manufacturers (yes they will), shouldn’t the American People also get stock and/or warrants in exchange, and shouldn’t they, The People, own the stock and warrants themselves rather than having them held in trust on their behalf by the United States Government? The bailout is insane but the Washington Wise Guys are dragging the country down that road so it is prudent to ask what can be done to mitigate some of the worst side effects?
The usual excuse given for why other large public holdings, primarily land and natural resources, must be held in trust by the government rather than dispersing ownership among the people in shares the way ownership rights in most other assets are held is that something about the asset in question requires perpetual centralized management and bureaucratic stewardship on behalf of all the people.
Now don’t get me wrong. Personally I dispute most of those claims, whether they are made on environmental grounds where national parks and preserves are concerned or on some other spurious “public-interest” grounds where natural resources are concerned. But, certainly none of these arguments hold where the proceeds of the financial bailout are concerned, so for the sake of argument, I am willing to set aside a discussion about these other public holdings and ask two simple questions about the multi-trillion-dollar financial bailout now underway:
1. Shouldn’t the United States Government insist that all companies receiving an injection of capital, loans or guarantees from the federal government give up an amount of ownership and/or warrants entitling the bearer to purchase ownership at a specified price in the company commensurate with the size of the pubic investment, loan or guarantee?
2. Why doesn’t the United States Government distribute these stocks and warrants directly to the American People?
There are various estimates of the amount of money that has been or will be spent on the bailout. Let’s look at a range of them and how the various estimates would translate into personalized holdings of equity interests.
The simplest way to think about a distribution is on a per capita basis, although I do not think that really is the most equitable way. Nevertheless, it may be the only politically viable way. Regardless, the formula for distribution of the assets to the American People is far less important than the principle that these assets should be distributed directly to them, right now.
According to the latest Census Bureau estimates, there are currently 305,754,329 people in the United States. The highest figure so far being bandied about as the eventual cost of the bailout is $8.5 trillion, which amounts to $27,800 for every man, woman and child in the country. Even if the federal layout for the bailout turned out to be no more than, say, $2.5 trillion dollars, surely a low-ball estimate, that would amount to $8,176 per capita.
There are numerous ways the distribution of these shares and warrants could occur. The simplest would be to use the stock and warrants acquired through the bailout to capitalize one, preferably several mutual funds under private management. Shares of these mutual funds could then be put into a personal retirement account established in the name of every person in the country totally independent of Social Security. Each account would be completely under the control of the individual whose name it is in or that individual’s trustee if he or she is a minor or incapacitated. No restrictions or taxes would be placed on the account beyond the restrictions placed on any other Roth 401(K) account. Shares of the mutual funds held in the accounts could be sold and purchased freely at individuals’ discretion, and any other asset permitted held in any other retirement account could be held in this account.
It’s the simple, just, and efficient thing to do. It’s change we can believe in and change we need. Why not do it, Mr. Obama? Yes, you can.
Letter to the Editor View all comments (19) | Leave a comment
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Rocco| 12.9.08 @ 6:45AM
While I don't agree with this whole bailout scheme, it is a done deal. This might be the best way to deal with a bad situation.
Melvin Leppla| 12.9.08 @ 6:59AM
Have you people lost your minds? Do you think for one moment that members of the Senate and Congress will pass along any dividends, profits, or whatever to the American people.
Barney Frank, Chris Dodd orchestrate the biggest money skimming operation in US history and Americans are giving up and resigning themselves to Nationalize our auto industry to the point that government will tell you what to drive.
Government tells us what to eat, what to drive, how hot or cold to keep our government leased homes, tells us where our kids can go to school, what they will learn.
Government will soon decide who lives or dies with rationed government run health care.
I don't know about the rest of you, but I'm sick and damned tired of government's intrusion into my life.
Some of us want to be individuals, we want our own personal identity not to be classified as any particular ethnic, age, or gender group.
I am me! and not some faceless Social Security Number to a bureaucratic government automaton.
If you want to be some mindless government zombie who waits for government to do everything for you, fine, but don't take the rest of us with you.
trurl| 12.9.08 @ 7:17AM
The problem is that maybe I, as a private citizen, don't *want* be invested in these companies. If I did, I would be already.
On the other hand, since we're apparently going to be buying a few billion $$$ worth of cars I'd sure like one. When do I get it??
TRUBLUE| 12.9.08 @ 7:50AM
Your deep distrust in U.S. government handling property on behalf of the citizens represents quite a radical view. Take your thoughts a step further in that direction. Ask yourself if government is not to be trusted with something down to earth like property - why not disband it all together. This would immediately cut huge funds it spends and handles on war in Iraq. What a bureaucracy!
JP| 12.9.08 @ 8:20AM
The problem with Mr Hunter's thinking is he does not take into account the private shareholders. Why would any of the institutional investors stay with the Big Three if the Feds will take all profits? Individuals do not lose thier property (or freedom) by accepting the lagress of the Federal Goverment. Why should a public corporation? Using Mr Henry's logic, we woould eventually all become corvees of the State.
On a more practical level, a funds manager will most certainly sell off any shares of the Big Three if the Feds grabbed all future profits as a condition of thier loan.
Daphne Kenward| 12.9.08 @ 8:32AM
Anybody who thinks they are going to get anything out of this bailout had better think again.
One thing with the public they have a short memory.
And the other thing to remenber is what garantee has anyone got that these foolish ideas are going to work. Market forces decides what works and what does not.
One thing is true as long as people out there has no confidence in the market no one in their right mind is going to buy new cars when they don't even know if they will have a job next week let alone next month or next year.
Even people in the business sector are concerned about their market shair.
When banks are being bailed out, and large companies, it dose not paint a prosperious looking picture.
People who don't have money to pay their rent or mortgage, is not looking to buy new cars.
TJW| 12.9.08 @ 11:55AM
The USA has gone insane.
HOPE YOU ENJOY NATIONAL SOCIALISM :
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years.
DaveS| 12.9.08 @ 5:24PM
My very conservative brother and a very conservative family court judge friend of mine expressed favor towards the TARP action in October -over my strenuous objections, of course. The camel's nose in under the tent. The rescuers, as everyone knows, are also the government perpetrators. Shame on the Detroit CoB whoring in Congress. Did anyone get the N. American General Managers of Nissan and Toyota to testify? My objections had nothing to do with success and only with the invitation to government to run everything. We are asking a wrinkled set of teenagers in the Congress and the bureaucracy to pick winners. It galls me to see anyone in Congess grill these guys, posture, and then give them a floatie. You cannot make this stuff up. Much of what they said would come to pass if we didn't pass TARP has come to pass. Wait 'til 2010: there's going to be an electoral bloodbath.
Steve| 12.9.08 @ 7:22PM
Instead of loaning money to the auto companies, why not just buy them? The market cap for Ford and GM are much less then the amount being asked for, so it would be a bargain.
Then give the companies to the UAW. Just give it to the union. They can sell shares to recapitalize. They can fire the entire executive staff and the board. Bring in their own people.
They would also be in an excellent position to renegotiate labor agreements.
Alan Brooks| 12.9.08 @ 10:51PM
if our taxes are our money then this is the only way to get it back.
Michael L. Hauschild| 12.10.08 @ 11:38AM
"Lawrence A. Hunter is former staff director of the congressional Joint Economic Committee and currently president of the Social Security Institute."
I just took the time to read up on Mr. Hunter (only the articles presented here in AS). He is, and represents, just what a "former staff director of the congressional Joint Economic Committee" should, raving lunacy. Nothing good comes whenever the "United States Government insists" something on private enterprise. Using the taxpayers so he and his ilk can "buy" more regulation is the reason we are where we are now.
Anything the government can interject is not ".... the simple, just, and efficient thing to do.
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