May 6, 2009

THOMAS COOLEY: Are There Any Rules In The Bailout Game? For the Obama administration, the answer is ”no.” “Many investors are sitting on the sidelines, as is much money. Why? Because it is impossible to know what the rules of the game are. And that’s because the administration and the Congress keep changing the rules in capricious ways in pursuit of larger political objectives. . . . The Obama administration has shown repeatedly that it is willing to change the rules and even challenge the sanctity of contracts in the interests of its political agenda. The best, most recent example is the Chrysler restructuring.”

I think the resulting “capital strike” — which will apply to foreign capital as well as domestic, and which will extend to a reluctance to purchase even Treasury securities if people find the Obama Administration sufficiently capricious — will do harm that will outweigh any conceivable good that these programs can produce.

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