what is a bailout 
a bailout is when a business an individual or a government provides money and or resources also known as a capital injection to a failing company these actions help to prevent the consequences of that business s potential downfall which may include bankruptcy and default on its financial obligations businesses and governments may receive a bailout which may take the form of a loan the purchasing of bonds stocks or cash infusions and may require the recused party to reimburse the support depending upon the terms bailout explainedbailouts are typically only for companies or industries whose bankruptcies may have a severe adverse impact on the economy not just a particular market sector for example a company that has a considerable workforce may receive a bailout because the economy could not sustain the substantial jump in unemployment that would occur if the business failed often other companies will step in and acquire the failing business known as a bailout takeover allowing a company to fail can have significant consequences both for the company itself and for the wider economy as in the case of contagion below are some other reasons why letting a company fail may not always be the best option and why bailouts may be warranted overall while allowing a company to fail may be a necessary and unavoidable outcome in some cases it is generally seen as a last resort and is often avoided through bailouts or other forms of financial support examples of bailoutsthe u s government has a long history of bailouts going back to the panic of 1792 since that time the government has assisted financial institutions during the 1989 savings and loan bailout rescued insurance giant american international group aig funded the government sponsored home lenders freddie mac and fannie mae and stabilized banks during the 2008 too big to fail bailout officially known as the emergency economic stabilization act of 2008 eesa 1 further the financial industry is not the only one to receive rescue funds throughout the years lockheed aircraft corporation lmt chrysler general motors gm and the airline industry also received government and other bailout support in 2010 ireland bailed out the anglo irish bank corporation to the tune of 29 3 billion 2 greece received european union eu bailouts which topped the scale at around 326 billion 3 however greece is not alone in needing outside help to manage debts other rescues include south korea in 1997 indonesia in 1999 brazil in 1998 2001 and 2002 and argentina in 2000 and 2001 also it is essential to understand many of the businesses which receive rescue funding will eventually go on to pay back the loans chrysler and gm repaid their treasury obligations as did aig however aig also received aid in ways other than merely financial which is harder to track as you can see bailouts take many shapes and forms also with each new bailout the record books are reopened and a new biggest recipient award is updated consider some of these other historical financial rescues during the panic of 1792 debt from the revolutionary war led the government to bail out the 13 united states 4the u s government offered one of the most massive bailouts in history in 2008 in the wake of the global financial crisis the rescue targeted the largest financial institutions in the world who experienced severe losses from the collapse of the subprime mortgage market and the resulting credit crisis banks which had been providing an increasing number of mortgages to borrowers with low credit scores experienced massive loan losses as many people defaulted on their mortgages financial institutions such as countrywide lehman brothers and bear stearns failed and the government responded with a massive assistance package on oct 3 2008 president george w bush signed into law the emergency economic stabilization act of 2008 which led to the creation of the troubled asset relief program tarp tarp allowed for the united states department of the treasury to spend up to 700 billion to purchase toxic assets from the balance sheets of dozens of financial institutions 1 by its end tarp disbursed over 443 billion to financial institutions 5 this figure represents the biggest bailout in financial history to date bear stearns which became one of the largest investment banks with 2 billion in profits in 2006 was acquired by jp morgan chase in 2008 6automakers such as chrysler and general motors gm were also knocked down during the 2008 financial crisis the automakers sought a taxpayer bailout as well arguing that without one they would not be able to stay solvent automakers were under pressure as slumping sales plunged amid the dual impacts of surging gas prices and an inability for many consumers to get auto loans more specifically the high prices at the pump caused sales of the manufacturers suvs and larger vehicles to plummet simultaneously the public found it difficult to get financing including auto loans during the financial crisis as banks tightened their lending requirements further hampering auto sales while intended for financial companies the two automakers ended up drawing roughly 63 5 billion from tarp to stay afloat in june 2009 chrysler now fiat chrysler fcau and gm emerged from bankruptcy and remain among the larger auto producers today 7as of april 2021 the u s treasury has recouped 377 billion of the 443 billion it dispersed and gm and chrysler paid back their tarp loans years ahead of schedule the u s treasury ultimately wrote off approximately 66 billion including stock losses 5