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95 Minn. L. Rev. 1733 (2010-2011)
Uncomfortable Embrace: Federal Corporate Ownership in the Midst of the Financial Crisis

handle is hein.journals/mnlr95 and id is 1733 raw text is: Article Uncomfortable Embrace: Federal Corporate Ownership in the Midst of the Financial Crisis Steven M. Davidofft The federal government struggled mightily to rescue the financial system during the panic of fall 2008. The govern- ment's hurried, frenetic response can be described as regula- tion by deal, a term David Zaring and I coined to explain the ad hoc process by which the Federal Reserve, the Federal De- posit Insurance Corporation (FDIC), and the U.S. Department of the Treasury (Treasury Department) attempted to rescue failing financial firms and resolve the market crisis within the limits of their legal power.1 When the government concluded its dealmaking, it was left an unwilling holder of debt and equity interests throughout the financial sector. For good measure, it also owned sizable equity stakes in two of the country's three largest automotive manufacturers. The structure of this ownership was a product of the Treas- ury Department's regulation by deal approach. The Treasury Department did not use any single template. Instead, each new rescue and deal brought different ownership terms and models. The government effectively nationalized Fannie Mae and Fred- die Mac; took controlling equity interests in General Motors (GM), GMAC, and American International Group, Inc. (AIG); acquired noncontrolling equity and debt interests in Citigroup and Chrysler; and purchased nonvoting preferred securities in t Professor of Law, University of Connecticut School of Law. This Ar- ticle was prepared for, and presented at, the University of Minnesota Law Re- view Symposium, Government Ethics and Bailouts: The Past, Present, and Future. Copyright © 2011 by Steven M. Davidoff. 1. See Steven M. Davidoff & David Zaring, Regulation by Deal: The Gov- ernment's Response to the Financial Crisis, 61 ADMIN. L. REV. 463, 463 (2009); see also STEVEN M. DAVIDOFF, GODS AT WAR: SHOTGUN TAKEOVERS, GOVERNMENT BY DEAL, AND THE PRIVATE EQUITY IMPLOSION (2009). 1733

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