The Post-Crisis and its Critics

University of Pennsylvania Journal of Business Law, Vol. 12, No. 4, p. 1169, 2010

U of Penn, Inst for Law & Econ Research Paper No. 10-31

16 Pages Posted: 19 Oct 2010 Last revised: 21 Dec 2011

David T. Zaring

University of Pennsylvania - Legal Studies Department

Date Written: November 30, 2010

Abstract

What should we make of the continuing government oversight over the recipients of bailout funds in the aftermath of the financial crisis? It certainly blurs the public-private distinction and involves the state in business practices in which, as recently as 2007, it would not have dreamed of overseeing. In this brief symposium essay, I evaluate the government's slow exit from its dramatic market intervention and reject the oft-made, but rather unrealistic claim that its conduct represents a permanent abandonment of free market principles. After all, the regulators did not ask for the roles they were given in the aftermath of the collapse of the financial markets. And as the government’s crisis response matures, its market interventions have begun to look more and more prosaic. In fact, the government has acted as any other investor might in some cases, while in others it is doing things to the financial system that it has done many times before – and that investors expect the government to do. The government’s post-crisis roles as private equity manager and insolvency cleanup specialist are the sorts of tasks that we want it to take on, at least in extraordinary times – and they are essentially the same sort of services that we would expect of vulture funds and cramdown specialists in the private sector to provide were the intervention not to have happened.

Suggested Citation

Zaring, David T., The Post-Crisis and its Critics (November 30, 2010). University of Pennsylvania Journal of Business Law, Vol. 12, No. 4, p. 1169, 2010; U of Penn, Inst for Law & Econ Research Paper No. 10-31. Available at SSRN: https://ssrn.com/abstract=1693970

David T. Zaring (Contact Author)

University of Pennsylvania - Legal Studies Department ( email )

3730 Walnut Street
Suite 600
Philadelphia, PA 19104-6365
United States

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