As the government decides once again to bail out another falling company, I can't help but think of what kind example this sets for present and future companies. It reminds me of how my mom always says I should set a good example for my younger sister, and that whenever I do something, she will think it's okay to do that too.
Bailing out companies gives other companies no incentive to be careful and safe in their actions, but instead to take risks because they know they will be taken care of should something go wrong. It's not that I completely disagree with bailing out a failing corporation, it's the countless times the government has said they won't do another bailout, and yet when push comes to shove, they are once again funneling tax-payers money into companies that maybe should have had stricter regulations placed on them in the first place.
I realize the bailout of AIG was more for the people who have their 401K's in the company, and not so much for the people who actually work for AIG, but I can only see it as another prime example of the government making it okay for a company to do whatever it wants, without fear of the consequences
4 comments:
I agree that bailouts set a bad example. It is not fair that the government will spend our money to bail out these major financial institutions and help these major CEO's make millions of dollars when businesses fail everyday without the Government so much as acknowledging it. However, I believe that the Government is not trying to save the institutions as much as it is trying to save the economy. If the government let these institutions go under then there could be bread lines and a re-enactment of the Great Depression.
I agree completely the economy as a whole is obviously the Fed's first priority when making these bailouts but it does set the wrong example that unnecessary risk is accpetable when the governement will always be there to help you out.
I don't think bail outs are necessarily a bad example because i feel like the government is doing what it is doing in an attempt to prevent a major economic slowdown but with repeated bailouts is this what the soft budget constraint is? cause if it is then it is possible that these bailouts are setting a bad example.
These bailouts, in my opinion, definitely set a bad example. We should let the market decide who stays and who goes. This recession that we are in isn't getting any better, and we really won't start seeing it get any better until we hit the bottom and have nowhere to go but up. I say we should have just let them fail so that the most competitive firms are in the market, not the biggest ones.
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