Diary

We Shouldn't Bail Out Shareholders When Times Are Tough

Just heard Obama say in a speech that we shouldn’t bailout shareholders of AIG because they benefit when times are good so they should suffer when times are tough.

I agree completely.

Unfortunately, he doesn’t. Since he advocates a windfall profits tax on oil companies because they are making lots of profits, he doesn’t want shareholders to benefit when times are good. But he is okay with letting them suffer when times are bad.

I can’t quite get my mind around the logic behind that type of incentive structure, but I’m pretty sure it’s not good.