Bush Adviser: We Will Not 'Micromanage' Banks
CBNC just concluded a long and productive interview with Ed Lazear, President Bush's chief economic adviser, discussing today's $250 billion partial nationalization of U.S. banks.
"We are not about to micromanage banks," Lazear said. "We still believe that the private sector is the appropriate place for conducting business.
"The last thing we want to do," Lazear said, "is to become interventionist." Presumably, Lazear meant from an operational standpoint; simply by investing in private banks, the government has become interventionist.
Lazear ticked off the three reasons why taxpayers should not be concerned that today's nationalization plan is an abandonment of U.S. capitalism:
- The U.S. government will not get voting rights in the banks it buys into.
- The U.S. government will not take seats on the boards of the banks.
- The banks have the opportunity to buy back their shares from the U.S. government if and when they get healthy enough to do so. "And then the government will be out of it completely," Lazear said.
CNBC's Maria Bartiromo asked Lazear if the government will next intervene in other troubled U.S. sectors, such as the auto industry.
"The financial sector makes all the other sectors go," Lazear said. "We don't really look to [get into] other sectors to get those going," though he stopped short of ruling out the possibility.
Lazear said the economy's third quarter will likely show worse performance than the second quarter, in terms of growth, and the fourth quarter likely will be worse still.
"This has been a huge shock -- there's no denying it," Lazear said. "It's tough for the economy to shake that off."
Lazear's claim to economic fame comes from the field of employee compensation.
In 1981 while at Stanford, Lazear wrote a paper that found that highly-paid chief executives are not being compensated on whether or not they do a good job as a CEO, they're being reward for all the work it took to get them to CEO.
Here's a Stanford review of Lazear's paper.
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