January 14, 2009

 

Bailout

If there is a competition for one word which dominated the financial world in 2008, "bailout" will be at the top of the chart.

Looks like "Bailout" is the latest export from US to India. Indian govt is considering Rs 2000 cr bailout package for Satyam employees. This amount covers their salaries for next 3 months and some other expenses by the company. And this comes within a week of Govt saying "There is no question of Govt taking over Satyam."

Now, the question is what does govt get out of this transaction apart from the goodwill of Satyam employees?

How will this money be returned to govt? Will it get it from the revenues? Will investors allow that?

What happens after the current bailout package runs out after 3 months? A new package?

Is the govt setting a prcedent where promoters can run away leaving the employees to the mercy of govt bailout?

What happens to the those people who lost job due to bad economic situation? Are they any different? Clearly, they are not at fault for tough economic coditions.

What happens to all the investors who saw their investment dip by 70% in a day? Even they are not at fault. Will govt pay them as well?

There are a lot of "first"s waiting in the wings on this story.

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