Friday, March 6, 2009

Bailout money in exachange for majority stocks

There is something that keeps bothering me as I write this article. This is particularly true with the present recession that plagues the United States economy, whose wide-ranging impacts on the rest of the world is beyond compression. Albeit, it was at least good that President Barack Obama was able to prod US legislators to approve one of the biggest stimulus bills the United States has ever had without so much fanfare.

As the implementing guidelines on how the billions of money could be distributed are still being worked out, I couldn't help but be amused at how the money, especially for the automakers' bailouts are being considered, in order to help the American automakers lessen their operational sufferings in light of the present economic situation in America, wherein tens of thousands of workers have now been given their pink slips because their employers could no longer afford to sustain their salaries.

What is surprising, however, in this kind of economic situation is the manner in which the billions of bailout money was given to its recipients. In the case of the American automakers and the Wall Street finance companies, I was caught off-guard when the federal government had decided to just give the money away, which is tantamount to doleouts, even if it was meant to keep these big businesses afloat and to keep their employees on the payroll.

Many of us are aware that these bailouts come from the taxpayers' money so that it is only incumbent upon the federal government to protect the interests of the millions of American taxpaying public.

However, it seemed clearer now that there was no guarantee on how these automakers will be able to repay the bailout money that the federal government gave them. Research studies showed that some developing countries in Asia do not just give away taxpayers' money that simple and easy without having to make the recipients account for which purpose the bailouts were used and how they would be able to repay it.

Independent economists have strongly believed that those who have availed of the bailout money given must subscribe to the policies that the federal government will impose upon them. One of which was the idea that lowering the annual gross salaries of the corporate bigwigs would be advantageous to the interests of the millions of taxpayers. But one of the most important is the consideration that the federal government must employ a strategy that would make these bailout recipients think twice. For instance, rather than just give away the money, the federal government should have laid its cards by asking the bailout recipients (companies) to sign an agreement that would make the lender as one of their share holders. This is much better and more practical than the federal government not to expect anything from the bailout recipients once they fail to repay the billions of taxpayers' money. In this way, the federal government may have say on what operational and management strategies these companies will undertake because the majority stockholder will always have to option to decide on matters affecting the companies' finances.

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