Picking Winners And Losers

Some people think it is only a rhetorical question to ask: "Should our government be in the business of 'picking winners and losers?'"

I think it is a real question, not a foregone conclusion.

It was during my first year with the legal department of a large NY bank that I learned that, for corporate lending officers, it is a negative to have a 100% success rate - to never pick a borrower who failed. I learned that if you never make a loan which goes bad, you are being too conservative in pursuit of opportunity.

And working for large banks, I had plenty of opportunity to deal with the "troubled assets" folks; the bankers to whom corporate borrowers were transferred when suffering the slings and arrows of outrageous fortune.

Even before the fiascos of the Age of Definitives, commercial banks regularly made bad bets despite intensive credit analyses.[1]

Most conservatives like to argue that the government shouldn't be in the business of picking commercial "winners and losers" and they like to point to the failure of the solar company Solyndra LLC as proof. [2]

It occurs to me that if banks, the acknowledged experts in "picking winners and losers," get it wrong sometimes, how on earth can we blame the government when an occasional horse it has backed doesn't finish the course?

Those same conservatives love to argue that the government should follow business principles. (I disagree, because our government has much wider responsibilities than maximizing profits for a limited group of investors, but let's accept the idea for a moment and examine it.)

And proponents of capitalism also argue that investors deserve the lions share of profits because they have taken risks. [3]

So, on the one hand they argue that government should be run like a business, but on the other they say that government shouldn't take risks or "pick winners or losers" when that is precisely what business does routinely

There are some folks in this world with whom you just can't win, I guess.

The question isn't "Should our government be in the business of 'picking winners and losers?'"

The question is :"How should the government do so, when appropriate, in a responsible manner?"

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[1] Think of all the banks - and other business people - who picked Enron as a winner, and yet it turned out to be built on undetected frauds.

People need to be aware that the derivatives insanity mainly comes from the super-aggressive investment banking side of our newly combined "banks," not the commercial corporate banking side. The problem isn't with "too big too fail" - the problem is intermingling critical banking services such as our credit system and our payment systems with the high risk activities of investment banking - it hurts if a large investment banks fails – it is critical if our credit and payment systems fail

[2] It is a toss up whether conservatives trot out this "shouldn't be picking winners" arguments before or after they tell us this is an Obama administration scandal, ignoring the fact that the Bush Admin first started pushing it as a company to support.

[3] Totally ignoring the huge risk involving their very livelihoods that people take when they accept a job with a company. Typically, investors risk "extra cash" they have; workers risk their economic (and sometimes, physical) lives on the success or failure of the company they work for.