Posts Tagged ‘federal governemnt’

h1

Would You Take A Bailout?

June 16, 2009

I know I would not take a bailout. The government likes do do things like cap executive pay, force your top executives out, and even put you into bankruptcy. I am not really seeing an upside to getting emergency money from the government.  I do not think GM or the banks are either, since the banks are in a hurry to pay the TARP money back and GM is going into bankruptcy, the situation it was trying to avoid.  There is a lot smaller moral hazard there than I thought there would be.

The one upside to all of this I see is that creditors are probably going to be more open to negotiating with their debtors.  If the GM and Chrysler creditors had been willing to cut a deal, they would probably be getting a bigger return than they are now.  After all, once the federal government got involved, it is going to protect its interests first.  It is kind of like taking money from a loan shark.  The federal government will make sure it gets paid first.

So, remember all of this before you try to get bailed out by the federal government.  Taking money from them comes with a LOT of strings attached.