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What About the Shareholders?

By josh donlan on September 22, 2008.

paulson.pngEconomist Raghuran Rajan (past Chief Economist for the International Monetary Fund and Professor of Finance at University of Chicago) has an insightful view on the current financial crisis. He also asks what seems to be an important question that no one is asking: Why are we (the US Government) bailing out the system before the shareholders are asked to do so first? He argues that asking the shareholders to put up more capital to rescue the system should be the first thing to try. Government intervention is actually the third of three options.

Given that a $700 billion - $1 trillion bail out is getting rushed through Congress, it seems an important question to ask. Rajan argues, rather convincingly, that the government may be moving to fast. Why? Panic in an election year?

You can listen to Dr. Rajan's interview with NPR's Planet Money on Friday here.

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Better yet, let's get some of those overpaid CEO's to pay back into their respective companies first before we talk to the shareholders.

How many millions/billions do they really need?