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October 17, 2009
When the government controls banks
J.W. Verret, a guest blogger at the Volokh Conspiracy, makes some interesting observations and projections regarding the banks that received bailout funds. He predicts that they will be compelled to grant risky loans to borrowers in battleground states in the months and years ahead. Will lawsuits follow from aggrieved shareholders? He argues that the sovereign immunity enjoyed by the federal government may shield lenders from being held responsible for shareholder losses. Verret looks at what follows when governments around the world take stakes in their banks: they become tools for politicians to reward the faithful, bribe the skeptical, and punish their opponents. Read Verret's posts and then weep.