Looking Back on the 2008 Financial Crisis

During the 2008 Great Recession, the argument for a sovereign bank bailout was that it would prevent contagion where a collapse spreads from one bank to another, leaving other financial institutions and companies without access to the capital markets and freezing bank assets until they are required again. The close interconnectedness of banks, this argument argued, meant that one bank’s collapse could trigger the collapse of many other financial institutions. The resulting collapse of an entire industry would hurt the economy as a whole, as the payment system that provides credit to worthy borrowers, the companies that draw up payrolls, and the entrepreneurs who set up businesses would be constrained, and the economy would collapse. Even the best casino bonus UK platforms would have run dry, you would think, but it’s at times like these when such platforms actually flourish.

At the end of the process, the company would collapse, many would lose their jobs, and government resources would be wasted. Rescuing a company does not necessarily mean an advantage for the company or a loss for the US government, but it can lead to a double benefit for both parties. When the government grants a loan to a company in difficulty, it can do so at interest on top of the amount it makes available to the company in difficulty.

In such cases, the bailout protects the country, not the company. In some cases, using state funds to rescue a company is the kind of investment that can be used to benefit the company in times of crisis, with the money remaining in the state fund until the money is returned. It is also possible to reap government benefits from a company’s private shares if they are sold at higher price after the end of the crisis and economic conditions improve.

Controversy grows in US over government bailouts. Many economists say there were too many bailouts after the 2007-2008 global financial crisis. In fact, many zombie companies are using resources that could have been more productive and that companies could have used better.

On October 3rd, 2008, President George W. Bush signed the economic stabilization and emergency emergency budget of $700 billion in 2008 after Treasury Secretary Henry Paulson asked Congress to approve a rescue package to buy mortgage-backed securities that were at risk of default. The US government has a long history of bailouts dating back to the panic of 1792. In 1989, the government helped to bail out financial institutions by bailing out savings and loans. The government also bailed out the insurance giant American International Group (AIG), financed government-backed home lenders Freddie Mac and Fannie Mae. And in 2008 the banks were stabilized with the “too big to fail” bailout known as EESA.

The creation of the Troubled Asset Relief Program (TARP) which provided a $700 billion bailout fund to distribute to large US companies that qualified for the program was one of the measures taken by the government to deal with the Subprime Mortgage Crisis. The term Bailout is of maritime origin and describes the act of removing water from a sinking ship with a bucket.

Bailouts and takeovers relate to scenarios in which a stable company’s government takes control of a weak company to help it regain its financial strength. Bailouts can be for profit, such as when a new investor revives a struggling company by buying its shares at a resale price, or for a social purpose, such as when a wealthy philanthropist transforms an unprofitable fast-food company into a non-profit food distribution network. Individuals who own shares in a company, so-called shareholders, are entitled to claim a portion of the remaining assets and profits of the company when the company is dissolved.