Commenting on the White House’s Chicago-style negotiations with Chrysler’s creditors, The Atlantic‘s Megan McArdle writes:
[W]hen did it become the government’s job to intervene in the bankruptcy process to move junior creditors who belong to favored political constituencies to the front of the line? … these people lent money under a given set of rules, and now the government wants to intervene in our extremely well-functioning (and generous) bankruptcy regime solely in order to save a favored Democratic interest group.
Later live-blogging the Berkshire Hathaway shareholder meeting, McArdle reports:
But this whole line of question highlights something for me: regulatory risk is a gigantic concern this year. Every third question seems to be about some major government project, and what sort of havoc it might wreak on his business.
Last night, I went to dinner with some investors, where a long conversation about the difference between investment and gambling ensued. Warren Buffett followers aim to invest, not gamble. But when the government is involved, it’s all gambling–none of the people I’ve spoken to, and (I’d wager) virtually none of the people in the arena, have any particular insight into the workings of the government processes. Hell, these days, the people I speak to at Treasury and the Fed don’t seem all that certain about what they’re going to do next.
An investment in Goldman Sachs and Wells Fargo is a bet that, first, the world economy won’t really collapse, and second, the government won’t get mad and take your money. There’s no reason to believe that Warren Buffett, or anyone else, has any good way to assess the probability of those beliefs.
Since Novemeber of last we’ve been saying that with TARP at its disposal, our government has become perhaps the single most disruptive force in the global economy. It is way past time to end the TARP.
