The boogeyman in question is the combination of Private Profit and Social Risk.
The scenario--I work my way into a position of authority in a major corporate entity. Thousands or tens of thousands or more people rely on my companies existence--either for jobs, resources, or equity. This company has grown so large that its demise is an actual threat to the nation.
(Libertarians, I know you don't think such a creature exists. However, as long as we live in a Democracy--or something relatively close to one--any organization effecting hundreds of thousands of jobs will be considered to big to fail by those elected by those hundreds of thousands)
As such, I know that any risks I take will not result in too terrible of consequences. The government--the people--will bail me out. However, any profits I make with that risk will result in my personal profits.
Its like playing roulette and having the house cover your losses. You don't have to worry about losing too much. You just have to worry about how much you are going to win.
I think a law should be passed that puts the risk back in positions held in organizations deemed too big to fail. If they become so big that they will have social impact, then socializing the profit seems natural. On the other hand, just randomly grabbing profits from large organizations will not encourage small organizations to grow.
How about if we enact a law stating that any organization that comes to the government for loans or bailing out is subject to a special tax, not on the failing organization, but on those within the organization who profited during the boom years.
That tax would be 85% of their net worth, not to exceed the value of the loans and aid requested.
Hence the balance between risk and profit is maintained, even with organizations whose demise would be deemed too expensive for government safety.
Posted by King of Men (Member # 6684) on :
Right down to the janitors and secretaries? If not, where do you draw the line?
I think a simpler way to get the same effect is a spirit-of-the-law clause. If a jury finds that you acted within the letter of the law but that a "reasonable person" ought to have seen that you were taking huge systemic risks, off to jail you go.