chapter  34
13 Pages

Government bailouts

ByRobert E. Wright

A bailout occurs when a government provides aid to (bails out) a financially distressed entity (business, industry, or government).1 “Bailing out” evokes three relevant emergency-related metaphors: emptying water from a sinking boat, parachuting from a doomed aircraft, and getting out of jail. Government bailouts (hereafter simply bailouts) are a subset of government resource transfers called subsidies or, when directed to big businesses, corporate welfare (Adams and Brock 1987: 75; Glasberg and Skidmore 1997: 2-3; McGee 2008: 9). They can be differentiated from disaster relief, or aid designed to counteract distress caused by natural or manmade forces clearly outside of the resource recipient’s control (Auerswald et al. 2006).2 Some bailouts are complete, entailing no losses to creditors, employees, managers, owners, or other stakeholders. Others protect only uninsured creditors or other preferred stakeholders (Kaufman 2004). Some bailouts are systemic while others aid only a specific entity or entities.