Government front running

This is what happens when government front runs the private sector:

Bailouts Punish Investors in Bank Capital Notes
2009-01-23 12:13:34 .845 GMT

By John Glover
Jan. 23 (Bloomberg) -- Investors in bank capital securities
are being punished as the notes plunge in value on concern
government bailouts will make them effectively worthless.
Lenders use so-called Tier 1 notes to bolster regulatory
capita and cushion senior bondholders and depositors against
losses. The CHART OF THE DAY (above) shows the $93 billion market is
suffering the biggest slide on record, according to data from
Merrill Lynch & Co.’s Euro Sub-Debt Tier 1 Index.
Banks may be forced to stop paying interest on the
securities as a condition of getting billions of dollars of
taxpayer’s cash, according to Simon Adamson, an analyst at
CreditSights Inc. The price slump is hurting investors such as
U.S. insurer Aflac Inc., whose shares fell the most in more than
25 years yesterday as Morgan Stanley called the firm’s
investments in “a rapidly escalating concern.”
“Tier 1 investors are being punished,” London-based
Adamson said in an interview. “Now that governments are bailing
out banks or nationalizing them, the risk of interest deferral is
increasing.”
Tier 1 bonds, which combine elements of equity and debt,
typically have no set maturity and issuers can defer or pass
interest payments. Holders are paid after other debt investors in
the event of a bankruptcy.

If there's one thing the market absolutely hates, it is uncertainty. As a private investor, why would you consider investing in anything if there was the chance that government was going to either change the rules of the game on a whim or step in front of you in the queue to book a return on investment?

This is a perfect example of why excessive government intervention will effectively prolong our much anticipated economic recovery.

Seems we may be doomed to learn the lessons of the 1930's all over again.