Bailout

Bailout

A capital infusion offered to a business with a national or multi-national footprint that is in danger of bankruptcy, insolvency, or total liquidation.  Financial aid can be provided in the form of debt or equity offerings, cash contributions, or some form of loan or line of credit, and is often accompanied by greater government oversight and regulation.  The failure of a business that employs thousands or plays an influential role in the economy potentially can send shock waves throughout the entire economy, including other industries. The credit crisis that began in 2007 created numerous failures around the world, which resulted in a large number of government-sponsored bailouts in almost every industry across the globe. See: Conservator, Conservatorship.

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Bail Out

To give money to a company so that it avoids bankruptcy and is able to continue operations. Generally speaking, the term often refers to a government bailing out a private corporation. A bailout may take the form of a direct transfer of capital, or it may occur indirectly through low or no interest loans and subsidies. For example, in September of 2008 the insurance conglomerate AIG found itself in dire straits. The Federal Reserve bailed it out by extending $85 billion (and eventually $182 billion) in credit to the company. Proponents of bailouts say that they keep an economy afloat when an industry thought too big to fail otherwise would collapse. Critics contend that bailouts are inefficient and that non-competitive companies ought to fail. See also: Cash for clunkers.

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bailout

The financial rescue of a faltering business or other organization. Government guarantees for loans made to Chrysler Corporation constituted a bailout.