Fallout from AIG
Goldman Sachs is going to be returning its bailout money ASAP. This is no surprise given the bill that made it through the House applying punitive taxes ex post facto. The upside is that taxpayers will have a full return of their money plus interest. The downside is that we can expect an almost universal rejection of bailout money even if the companies need it.
A parallel would be to a number of patients who need blood. The doctors rush over to administer the new blood and the patients sign a form saying they will pay $10 for the service. Later the doctor’s cross out $10 and write in “all the money you make this year” because the doctor’s find out that in their rush to save everyone, they gave some patients too much blood. Naturally we can expect most patients to reject the contract even if they need to blood. Their choice is a quick death now or to perhaps survive without it.
We should not forget that these companies are not charities. The executives are there to make money. If that incentive is removed, we can expect the executives to jump ship in short order.