The government bails out a company in an economic emergency. It’s only right that the terms are clear as to what will happen to the people who own that company and what is happening to their investment in that company, especially when large amounts of public funds are going to protect that investment. Security of control is a perfectly reasonable demand to make in any settlement with the public.
This is, of course, an entirely different matter from the bigger argument as to whether wealthy interests should have any political power at all in a democracy. It is, in fact, to the benefit of critics of influence-buying to focus on particular decisions, rather than principles. Once a particular person or company has been proved to have benefited, it remains to prove that the particular person or institution was willing to prolong a war deliberately to make its investment profitable.
There may be a compelling reason to rescue this company (other than the simple fact that it employs people). On the surface, it seems that owners of a company who made bad decisions should eat the losses and not expect the public to help them cope with the consequences of their refusing to take responsibility for those decisions, even if it means lost jobs and interrupted services that damage other businesses, too.
Still, it may very well be possible to make an even better deal if enough voters can be persuaded to make up the difference, leaving everything else good or better while leaving the responsible people completely free of any consequences.
So, then, what is the urgency about an agreement whose terms are not revealed?
If they have to be protected for this specific agreement to work, then we have a true tradeoff that voters must decide is an acceptable one. The issue also gets more complicated by considering that different debt holders and investors with varying levels of equity may have all sorts of claims on the company that they would not have in the absence of the deal.
What exactly is the objective, by the way? Keeping the service available? Preserving jobs? Preserving the ownership arrangement? Depending on the details, the answer may be yes or no.
If we want to make the most of the situation, one of the most important steps is to identify exactly who you’ll be offering support, and what obligations you might be imposing on them, and what might happen if those obligations were not met. The first proposal you have to offer might not be the only possible way to save the company, or to save yourself.
Don’t give yourself a reason to believe that the wealthy always win just because you have no money. It’s already a struggle to understand the real reasons why a household struggling to pay food and fuel bills would be infuriated at the idea that someone else might have their trouble financed out of money it has worked hard to earn, or that the help it was ever likely to get had been postponed, reduced or transferred into something with a more reassuring name.
Give them answers to these questions, and tell them that you have taken time to look at the answers in a way that makes sense. It will be money well spent.
Happens far too often.
A homeowner desperately needs to sell to an institutional buyer willing to pay a low price. A homeowner caught in a downturn may have no money and no capacity to wait for prices to return. Technically both parties can refuse the price, but one can live with the consequences of refusing and the other cannot.
Suppose that public policy supports the buyer in these situations and provides substantial backing, providing no comparable room for the seller to wait.
Have the economics changed? Have the respective abilities to hold out changed? Is public policy providing too much support to the buyer? Why? What public purpose does it serve? Are there alternatives? If public policy feels the need to keep the household in place, would that not be preferable to putting the seller on the street? Does this all flow from the particulars of economic fundamentals?
Or is it simply prescribed by expensive energy and dependency on Europe? If the latter, does it indicate an organized strategy to put pressure on allied countries? Or coincidence? If coincidence, there may still be a conflict of interest to examine. Who wants the concession and why would an official approve it?
In reviewing material on conflict, questions are often raised about the beneficiary of a conflict of interest and the chance it will be exploited or has been exploited. Having an opportunity to exploit a conflict of interest is something that deserves investigation.
Do we really need a subsidy to develop a particular technology that would be viable without it? If the business requires a bailout to survive, what happens to the value of labor? Is there an obligation to retain employment or continuity of service in return for public funding? These are important questions to ask before approval. The value of research into these conflicts is undeniable.
The public good should be a primary consideration in deliberation and in holding a company to a contract once formalized.
If a company goes to the government for support, and in return makes a bargain that includes a commitment to the public good, then there should be a written contract clearly articulating its concept of success.
Going forward, if and when the company becomes profitable again, there should also be a way to establish whether workers and customers and households received the something better they were promised. The company will be held to whichever result it contracted to deliver. The point here is that something specified in advance cannot simply be substituted for something else after the emergency is over.
Public decisions usually require some kind of written record, if only to make future decisions about maintaining them more secure. Those seeking to provide more security for people may be making a mistake if they bet on a financial breakdown severe enough to disrupt elite power without evaluating its costs and consequences. A collapse of the petrodollar would need that scrutiny too.
It is all the more important for decisionmakers on such significant matters to keep a record of the decision, allowing others to verify that these questions were carefully considered. Candidates who skip out on such scrutiny shouldn’t be occupying decisionmaking structures of the country.
Many of those who wish to pursue tax reform aren’t precise about what conditions they’d want to support. Some won’t even tell you that they want to raise your taxes. Why not force their terms to be defined? There’s no obligation to spend time pretending not to understand tax-and-spend agenda items. Whether a proposal to raise taxes on wealthy households and corporations would affect your own check, or your neighbors, depends on its terms.
Instead, take up the task of arguing principles. Anyone who wants to raise taxes is going to have things they want to fund, for better or worse, so they should readily admit, nay embrace, the next question. Which households and corporations, including the biggest but also the next biggest, do you plan to raise taxes on? And what mechanism, if you have one, do you plan to use?
I’m happy to accept the scheme of things that puts healthcare, childcare, housing, and other priorities ahead of my own commitments to work and study when I see others doing the same to tend to their own relatives. I may find it hard to do all of those things, but I manage. Those who have been so unjustifiably impatient with this discussion are at a loss to understand how others with what they could justifiably call more important obligations can’t seem to pay their bills.
If our impatience comes from the privilege of those who’ve done well in life (and I think it’s perfectly reasonable to expect that the old-fashioned way of earning it by education and demanding work has its pride of place), then who can blame those who expect their families to appreciate that fact? Indeed, they can hardly be blamed for expecting the pleasure of a successful family when they see prosperity as a measure of the national economy and not a zero-sum game.
I believe it is a more caring person who goes through the effort, once at the top, to see how they can enable others. The desire is to make things more affordable, more manageable, and more secure.
It is still said that everyone is entitled to their own opinions, as long as what they wish to do does not restrict others in what they want to do, own or study. So, as long as there is an understanding of the terms and conditions in which the agreement was made, everybody should be able to get along fine.
However, when you want an asset to hold for the long term and see the benefits of that but also need the money today, advice about holding it long term may not help. What if it is not the right time to cash in, and being patient could be the best thing for the investment, but you have to cash in so that you can live comfortably in retirement?
Also remember that in both examples the people giving advice may have real security in their lives. They don’t necessarily know the conditions, arrangements and responsibilities you are working within. That is why their advice may not apply to you. When their advice becomes your expectations, holding on can start to seem like an obligation even when it no longer makes sense.
Generational wealth is of course a nice thing, but helping the next generation get a chance is fundamentally more important. Any policy that takes opportunity seriously must take this into account. Conversations confined to rescuing people who already possess generational wealth leave that question unanswered.
If talks about the next rescue begin, there will again be tremendous pressure to approve it and sort out the uncomfortable questions later. Those who choose this arrangement today will leave their successors with obligations never properly written down, making recovery of the public benefit considerably harder.
References:
U.S. GAO: TARP transparency and accountability
Consumer Financial Protection Bureau: Options for homeowners unable to pay their mortgage