Isn't it interesting that pro-capitalist conservatives have pushed for governmental intervention into our capital markets. Even going so far as to the federal government take equity interests in major financial institutions. I have been concerned for years that so many individuals and corporations were basing their decisions upon best case scenarios regarding the future values of collateral and the income of those whom they lended to. If those assumptions didn't hold true, what would be the result? Some financial institutions hedged their bets and acted prudently. However others sought maximization of profits disregarding the risks. And though the government allowed such actions, they did so under pressure from the lobbyists from these organizations. But ultimately, this failure was a failure of corporate governance. Boards of directors have a responsibility to those they represent, to not only maximize profits, but to mitigate risks. Many of these boards batted .500, and though that works in baseball, it doesn't in finance.
And now we find ourselves with a federal government being asked to intrude itself as equity partners in financial institutions. As partners, they should have a role in corporate governance and you could feasibly see members of the board from the federal government, all while federal regulators, serving a different function examine their books and making recommendations to minimize risks. I know in credit unions, regulators evaluate credit unions using a 'CAMEL' rating. These stand for Capital, Assets, "Management", of which management includes the role of the board. So now, you may have federal regulators regulating board members who may be members of the federal government. Say what?
Honestly, I am still digesting what has happened during the past couple of weeks. I am an old school financial institution junkie. I take great pride in the role my own financial institution has played in economic growth for small and medium sized businesses. I view the federal role as a regulator, not as an equity partner. Admittedly the model for many other countries is a federal/private partnership in the financial markets. This isn't the United State's tradition, despite some important and often times useful regulations and oversight.
I have my concerns about where we are going, not because of ideology, but because of workability. This may all turn out fine. But this is an awkward and paradigm changing process for the federal government. The federal government, treated as the scapegoat under Ronald Reagan, is now asked to be the white knight. To say this change in policy and outlook is monumental is to be an understatement.