Exit Strategy

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

One of the questions the next president will have to answer is what to do with the financial institutions that have been “Paulsonized.” We speak of Fannie Mae and Freddie Mac and of American International Group, in all of which the federal government has emerged as a major shareholder under the leadership of the secretary of the Treasury, Henry Paulson. How long will the government hold on to its stakes in these firms?

How will the stakes be unwound? Will there be a transparent auction of shares or will the companies be placed in the hands of other financial institutions the way Bear Stearns wound up being swallowed by JPMorgan Chase? Will the companies be handed off to political cronies or to big campaign contributors? Will the government try to restore them to profitability and then sell them at a premium, or will it try to privatize the companies that have been Paulsonized as soon as there is a possibility of doing so?

These are complicated questions but they are also important ones and ones that the presidential candidates have not yet answered. Almost as significant as the answers will be the transparency with which the government announces its plans for disposing of these companies and the steadiness with which it adheres to the plans once they are announced. It’d be a good topic for some questions at the presidential debates.

The New York Sun

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