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The AIG Fallout

If government can dictate terms for anyone participating in government programs, including salary levels, will it reduce the willingness to participate?

Remember, justifiable outrage over AIG aside, the goal is to get people to start investing in the economy.

I was out to dinner with some hedge fund guys last night, one of them mentioned that he was at a meeting with other hedgies who were considering participating in the TALF yesterday, and several guys said they weren't sure they wanted to participate because they were worried that if they took loans or money from the government they might dictate what their pay and profits might be.

Even if they are saying they will not do that now, there was a feeling that it could be changed at any time.

This is a very real concern. The FT this morning reported that the TALF is facing some problems over uncertainty as to whether participants might be subject to restrictions on hiring foreign staff. They quoted an analyst from Standard & Poor's, who said, "the Talf might fall short of the planned $1,000bn 'due to certain restrictive terms and adverse market conditions.'"

What's the solution?

There's been talk about setting up special trusts, in which the investors would buy into a trust set up by a bank to create a barrier between them and the government.

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