Federal Interventions in Private Enterprise in the United States: Their Genesis in and Effects on Corporate Finance Instruments and Transactions

Abstract

In response to U.S. corporate failures involved in the current global financial crisis, traditional corporate finance vehicles and tools were widely used in new ways and for new purposes. Of course, one object of the U.S. government’s investment and intervention in, and exercise of influence over, private enterprise during the crisis was to provide for or ensure the provision of adequate capital funding. But its investment, intervention, and influence also represented a new way to oversee and otherwise regulate key business enterprises in the financial services and automotive sectors. This Article reviews certain aspects of the use of preferred stock, bankruptcy-related proceedings, and mergers and acquisitions in connection with the government’s recent, crisis-mode interventions in private enterprise. Further, it analyzes corporate finance aspects of these exploits and highlights potential effects of these activities on corporate finance instruments, transactions, and legal practice.

Keywords: corporate finance, preferred stock, bankruptcy, mergers, acquisitions, financial crisis, private enterprise, legal practice, Section 363

JEL Classification: G18, G32, G38, H59, K22, L19, M00, P19, P43