Question

In: Finance

please provide one-Page (no more than 1-page) discussion on this question: explain why President Trump/US government,...

please provide one-Page (no more than 1-page) discussion on this question:

explain why President Trump/US government, in helping corporations, cannot buy company stocks but only buy corporate debts or simply give "grants" to corporations? what if the government bought stocks?

Solutions

Expert Solution

First & foremost reason is the risk involved. Their investment policy has mandated minimum risk specified which can’t be breached. Another reason why American government or any government for that matter do not invest in stock market is as this would change the way that business works in the US in a way for which there is no political consensus on. One thing that's vital if you want a government to invest in the stock market is for there to be a general political consensus that this is a good thing. Once you have that, then you can put management of the stock into some non-partisan non-political fund. If you don't have this sort of political consensus, then it's not going to thrive & there’re many geo-political risks attached to it. One option is to form a public-private partnership to do this but this has its own challenges. The US needs to get money out of politics. Letting the government trade on the stock market would just add a huge amount of more money and lobbying in politics. Insider trading would eventually occur with companies altering their stock prices in order to inject funds into a campaign. If the government could trade on the stock market, it would breed so much corruption, so many different ways. It would probably be the final straw for democracy in North America and it's already pretty tarnished with the amount of clout corporations have in the political world. In nutshell, should the government is to invest in the stock market, it ought to do so cautiously and particularly - or else not at all.


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