Reuters is running headlines quoting Tim Geithner. He says the will seek to maximize value for taxpayers in banks in which it becomes a common shareholder. The headline sound mundane enough but government stakes raise the specter of the government pursuing goals other than economic ones. Like in the Chrysler case, markets fear the government will look to advantage favored political constituencies ( UAW in Chrysler’s case) over other less-favored groups.
Imagine the government forcing banks to lend to some groups and not others (already happening as a result of TARP)…
Geithner says that he expects more than $25 bln in TARP funds to be paid back while the government will seeks to reduce ownership stakes as quickly as possible in banks in which it has common equity stakes.
