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Comment by downandout | Hacker News Reader

The government is not a hedge fund. It has no expertise in running businesses. Had they done what your are suggesting, the markets wouldn’t have reacted the way they did, the companies would have gone bankrupt under government mismanagement, the economy would have continued to crater, and not $1 of the money would have been recovered.

It turns out that the architects of this bailout were very smart about the way they did it. Also, relative to the recent stimulus packages that have no hope of ever being recovered, the numbers from 2008 are quaint and the conditions under which it was given were extremely fiscally responsible.

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>>Had they done what your are suggesting, the markets wouldn’t have reacted the way they did, the companies would have gone bankrupt under government mismanagement, the economy would have continued to crater, and not $1 of the money would have been recovered.

Nah. Keep the management, they run the business not owners. In fact give them raises and bonuses. It's not like managers had other employment options.

But either way, they did get a lifesaving bailout, regardless of the merits or whether US got their money back

they did get a lifesaving bailout, regardless of the merits or whether US got their money back

They did, and given the systemic importance of the companies that received this money, that was a gift not only to the companies, but to the entire economy. We wouldn’t have an economy today had they not done this. Today we are capable of giving away trillions with no hope of recovery in part because of what was done in 2008 - and it was done at no cost to taxpayers.

The government isn't supposed to run the company. It's supposed to get an ownership stake to compensate for the risk it takes on. The bank would just issue additional non voting shares and sell those to the government as a punishment for the share holders of the banks and teach them a lesson to not put their money into mismanaged companies.

They wouldn’t have taken non-voting shares if this were the stance they were taking. When the government owns a controlling interest in a private company, investors will shy away from it. Even if the government doesn’t run the day-to-day operations, they can replace management at-will with people who will obey commands based upon political interests of the ruling party. That is an unacceptable risk to many investors. Ultimately, if they own it, they run it.

The point is that the outcome would not have been the same, because investors would not have treated the companies the same.

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