The financial crisis of 2008 opened the door to massive public interventions in the Western economies. In many nations, governments responded to the threats of illiquidity and insolvency by making huge investments in troubled firms, frequently taking large ownership stakes.
The magnitude of these investments boggles the imagination. Consider, for instance, the over $150 billion invested by the U.S. government in AIG (American International Group) in September and November 2008 in exchange for 81 percent of the firm’s stock, without any assurances that the ailing insurer would not need more funds. Or the Swiss government’s infusion of $60 billion into UBS in exchange for just under 10 percent of the firm’s equity: this capital ...