Sunday, October 23, 2011

Serious Business - Proposition 4

This is the fourth in a series of blog posts about how America might go about getting private enterprise back in the Passenger Rail business.

Proposition 4 is that bankers and venture capitalists are going to have to be willing to take more risk with less guarantee that government will back them up.

Hold on, you say?  This is supposed to be a blog about Passenger Rail and not about the sorry state of the banking system.  Well, the two overlap.

Proposition 4 probably applies to a lot of businesses, particularly heavy industries and heavily capitalized ones. Railroading is both.  America has gotten itself bunged up in an economic situation that has no way out without risk.  And this risk is going to have to be on the part of private enterprise and government both.  As a country, we have to be willing to believe that government bailouts of businesses -particularly financial ones - simply postpones the inevitable, and that the term "too big to fail" should not be a part of our vocabulary.

Now, from my point of view, government regulation and public policy drove the financial industry to ruin when institutions were forced to lend money to home buyers who had no hope of paying it back.  This house of cards had to fall.  No, I don't care who's to blame, but I do care who's to blame for our current situation.  Now we have a situation where the lending institutions are gun shy, and the government has just slapped on more regulations.  This is probably good for the single-family home market.  It will keep home prices reasonable for years.  But it's not good for the business community, and not for heavy industry.  Heavy industry runs on capital.  If the capital is not out there, heavy industry does nothing but stagnate.

I think Passenger Rail could return to the private sector if lending institutions were willing to forgo the promise of government bailout along with the regulations that come with it.  I think that, as time goes on, institutions with money to lend will see the upturn in demand for Passenger Rail, the astute management of the rail industry in general, and with God's grace the lifting of onerous regulation, and then see in Passenger Rail an opportunity to make a lot of money.  This will do a lot for the country and a lot to lift Passenger Rail out of the doldrums of Amtrak.

The only question is:  Do we have the political will to accomplish this?

By next time, I'll decide if there is a Proposition 5.

© 2011 - C. A. Turek -

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