Will Bailout Funds Benefit Main Street?

B.E. 100s leaders weigh pros and cons for small investors

Profit, on the other hand, views such potential opportunities for small investors as a positive development.  “[We don’t] think this is a bad idea.  Investment companies are already familiar with holding a diversified pool of assets, utilizing professional management and marketing the merits of a particular investment idea.  This is a good idea for small investors for the same reasons mutual funds are a good idea generally for the smaller investor — that is, lower risk through diversification, structured investment programs, extensive disclosures and professionally managed asset portfolios.”

The government’s involvement in the structure of the proposed funds is not clear, Profit says.  “I suspect the mutual fund companies would create, run, and market the funds.  The mutual fund companies would also probably service the shareholder accounts.  These are all functions that mutual fund companies have expertise in.  The question is how much of a partner would the government be in the funds, and whether they would be the initial shareholder at a size that makes the bailout fund idea feasible,” he says.

From Profit’s vantage point, the plan is neither a political gimmick nor a direct economic stimulus measure.  “We have all been negatively impacted by the toxic debt issues, and while it might be prudent to allocate TARP funds to large investment companies and/or pools of capital, they should not be the sole beneficiaries of our tax dollars being utilized in the bailout.  The proposed bailout funds as suggested might be a way to allow everyman or everywoman who is interested or willing to have similar opportunity to invest and benefit in bailout activities as large institutional investors.  We think that the bailout funds proposal is another indication of the Obama administration’s interest in leveling the playing field and providing access in all opportunities.”

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