Re:Private Equity Wants in on the Bailout? Spare Me
by solarkraft on Friday April 03, 2020 @03:52PM
(#22773334)
This is exactly the type of bailout Germany is considering. Maybe it's better than giving a loan (certainly better than handing out free money), but also creates an incentive for the government to invest a lot of money and political good will into the company afterwards so its shares won't become worthless, which can be dangerous if others are still calling the shots, because those are suddenly motivated to take way higher risks, knowing the government probably won't let them fail.
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Re:Private Equity Wants in on the Bailout? Spare Me
by clairity on Friday April 03, 2020 @05:58PM
(#22774345)
germany is certainly more advanced than the US in regard to responsible corporate governance.
governments taking equity positions in corporations can be bad because of the risk of corruption, self-dealing, and regulatory capture, not the principal-agent and subsequent sunk-cost risks you mention, imho.
unlike other shareholders, governments aren't strongly motivated by attaining the largest return for themselves, particularly since taxes and bonds are much easier revenue sources. and in crisis, the government has the negotiating leverage to stipulate stricter conditions upfront that aren't normally part of non-crisis investments.