You’re on the board of a couple of big companies. Their business is investing in home mortgages, and you force them to be moderately picky about what they buy. It can’t be too big, and must garner a sufficient rate of interest over a sufficient length of time. You also subsidize these companies through loan guarantees – it’s the only way anyone will buy their debt. Meanwhile, the companies’ management really has your ear because they take you out on the town a lot, and their private-sector brethren foot the bill.
By the way…how are those companies of yours performing? Well, they’re losing tens of billions of dollars each quarter, with little end in sight.
What do you do?
A) Nothing, and let the markets weed out all the garbage over the next two years or so
B) Recommend getting rid of all their analysts, and go party with the CEO
C) Vote for a top management shake-up, and go party with the private-sector folks
D) Relax their investment restrictions, giving them yet more avenues to lose their investors’ money
It’s a tough call. But if you picked “D” you’ve won!