Title: The Bailout Through a Public Choice Lens: Government-Controlled Corporations as a Mechanism for Rent Transfer
Abstract: Through the Troubled Assets Relief Program (TARP) bailout, the government took a controlling interest in a number of companies that remain publicly traded. There is significant prior debate over the consequences of government control of private-sector resources, but the present dynamic of government ownership through voting equity in publicly traded equity is fairly novel in the modern U.S. economy. This Article considers how the government is likely to put political pressure on firms taking bailout support through its equity voting power to cater to politically influential interest groups. This Article first explores a number of instances of government pressure at bailed-out firms that have worked in favor of politically influential interest groups. It then explains the process by which this occurs through a novel contribution to public choice theory. This contribution treats rent-seeking as a two-step process by which government-controlled firms use their politically conferred rents to subsidize transfers to interest groups. The Article also examines the incentives facing bureaucrats in overseeing the government’s investment. This Article then considers the constraints of administrative law and reveals how in this context they offer little remedy against the public choice conflicts of government-controlled firms. In part this is
Publication Year: 2010
Publication Date: 2010-01-01
Language: en
Type: article
Access and Citation
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot