Commentary

Maybe Criticism Does Help Limit Uncle Sam’s Control on Wall Street

Through the TARP bailout and trillions in Fed liquidity facilities, the government has amassed a substantial number of voting rights in banks and financial institutions. One of the big fears—that we at Reason and elsewhere—have voiced is what this government control would do to private companies. Perhaps all that criticism made an impact on Treasury. Bloomberg reports:

“The Obama administration is set to release a policy on how it will vote the government’s shares in the coming weeks. On many resolutions offered by investors—from demanding pro-environment policies to allowing domestic partner benefits to reining in executive bonuses—the Treasury plans to ask that its ballots be counted in the same proportion as the votes of other stockholders so it won’t impact the results… The Treasury is saying ‘this is not a policy tool, this is the result of a financial crisis,’ said Stephen Myrow, a former department official who is now a consultant to hedge funds and other investment firms.”

This is probably a prudent move by Treasury to calm critics claiming it wants to run the banks, and to decrease government participation in picking winners and losers in the market. The government should not use its voting rights as a stockholder to advance its social agenda, and it is comforting to hear Secretary Geithner say he wants to get public money out of the private sector as soon as possible. Of course to him that means as soon as is prudent, and his definition of that is different than what we would hope. Nevertheless, good news about the government’s role in the financial crisis is rare, we’ll take what we can get.

Anthony Randazzo

Anthony Randazzo is a senior fellow at Reason Foundation, a nonprofit think tank advancing free minds and free markets.