Okay, next thing is government involvement in the corporate sector. Okay, so capitalism is supposed to separate the government. The government does not get involved in business. So you might imagine that the United States, which is the most capitalist country by reputation in the world, would not have any government involvement in business. But actually you would be wrong. First of all, the government regulates business, and secondly the government can own shares in business. The United States government is the least likely to own shares in business. Other countries, like China, have the government with major shares in their business, that's a difference. Even so, a non-government business know that they may be nationalized in the future, there's always a threat. So there's a implicit claim even in the United States on businesses that might be nationalized. But as you know, there was a tsunami that overwhelmed the east coast of Japan and the electric power company on the coast in Fukushima was overwhelm by the tidal wave. And it spilled radioactive materials and cost immense dollars to the Japanese economy. So here, this company had done tremendous damage through not having proper preparation for this kind of event which seismologists could have told you was a possibility. They took risks. They were betting that it won't happen. Well, it was an unlikely event, I guess, but exposed who bears the cost now. Well, it turns out it's the Japanese government, because of limited liability. They can't impose all the costs of the nuclear disaster on TEPCO. Well, it would just drive them out of business, they can't do it. Japanese government can't go after the shareholders, which include your parents, [LAUGH] maybe you, effectively, you don't know it but many of you are shareholders in TEPCO. Because your parents have a bequest for you planned, and that bequest will include some international equity fund which owns some, so your parents don't even know that, you can ask them. Do you own shares in TEPCO, and they will never have heard about it, but they do own shares in TEPCO. So could the Japanese government go after your, or let's make it even more personal, go after you for owning shares in this company that imposed this huge disaster on Japan? Well, it's just unrealistic, you can't do that, it's not the law. So they had to deal with TEPCO and the Japanese government had to decide on what to do. Should we drive them to zero? Well, it ends up that the government owned, as of July 2012, 50% of the new TEPCO. And it has preferred shares that, I'm sorry, it has debt that it can convert to preferred shares so that the Japanese government own the 88.69% of the company. So you're ownership share, which you don't know you have, but you do have likely an ownership share, has gone down to a low level. The other thing that's happened is the share price dropped. So this is a plot of TEPCO share price from 2003 to the present, okay? And can anyone guess when the earthquake hit by looking at this chart? [LAUGH] So the other thing that governments do that make the government a shareholder in business is bankruptcy. So if you are a company that can't pay its debts, all right, because you're in trouble, business isn't doing well, you've just had an earthquake or something and you can't pay that back. What you are invited to do, by bankruptcy law, is to file for bankruptcy. Now, you do this because you're in trouble, and you can't pay the debt. So legally, in order to avoid a prison sentence or something really bad, your lawyers tell you, take your pick. Well, you might not be able to take your pick. The bankruptcy court may not allow you, but Chapter 7 is for companies that are so bad off that it's best to just shut them down and sell everything else. Then they're done. If there's anything left over after you've paid off all your debts, the shareholders in the company can get a liquidation amount. But typically there's not even anything leftover, so the shareholders are wiped out, the debt holders get pennies on the dollar, all the assets are sold, and they end the company. But Chapter 11 bankruptcy is used for companies that still have some enterprise value that you can argue shouldn't be shut down because we're doing something that people value. So let's reorganize the company. So you might wipe out the shareholders or you might maybe keep them alive with hoping that they'll get reimbursed. So General Motors is an example of that. But you see what's happening is that the government is accepting some of the losses of the company in trying to deal with the bankruptcy. Personal bankruptcy is similar to a corporate bankruptcy, because it allows you to take risks, and have your negative consequences born by the government. As long as you're not criminal, because even if it is criminal, all they can do is put you in jail and they still end up taking the loss. So the government is like a shareholder inevitably, even when it tries not to be. So I think it was an apt title, David Moss, who we've mentioned before, wrote a book called Government as Risk Manager of Last Resort.
