What year was the first bailout?

Amberman

I've been wondering about this.

In modern economics, at what point did Western governments take on the job of deciding that some companies had to be bailed out at all costs? Did it all start with LTCM? What charachteristics define a company which shouldn't be allowed to fail? What change in the environment came about to facilitate this change in policy?

Basically, at what point in the road did governments decide that they have to intervene in the markets to protect individual companies.

Im thinking about Chrystler in the 70's as the first post war example I can think of. Meh, it looks like its going bust anyway....just took a lot longer with government "help".

Did any governments intervene to save "buggy whip" or "telegram" or "railroad" companies when the market clearly signaled that these models were past their sell by dates?

Does anyone have any examples of bailouts that worked well?

All the best

Amberman

JackieT

I think the 1st bailout was during the Great depression, hoover bailed out banks and railroad companies

nesf

The first "bailout" of sorts was (to the best of my knowledge) the South Sea Bubble in 1720. The Government at the time stepped in to bail out investors who had lost their shirts in the affair, though in fairness they got the money to do this by confiscating all the assets of the directors of the South Sea Company. The Government then took over the stock of the company and put it to work dealing with Government debt.

In a show of how populism in these times is nothing new the Parliament passed a resolution calling for all the bankers involved to be tied up in sacks full of snakes and tossed into the Thames.

Saabdub

Suetonius records an interesting policy of general debt reduction that Caesar introduced as part of his general settlement following the Roman Civil War.

"With respect to debts, he (Caesar) disappointed the expectation which was
generally entertained, that they would be totally cancelled; and ordered
that the debtors should satisfy their creditors, according to the
valuation of their estates, at the rate at which they were purchased
before the commencement of the civil war; deducting from the debt what
had been paid for interest either in money or by bonds; by virtue of
which provision about a fourth part of the debt was lost."

This would have constituted a partial bailout of both the larger landowners who had borrowed heavily to buy lands in the dieing days of the Republic and who were facing ruin as a result of the wars and the financiers who had loaned them the money.

Saabdub

Amberman

INteresting stuff...

What about in the last 30 years.

What companies have been bailed out and what shape are they in today?

Heres 2 pre credit crisis companies that I can think of....

LTCM - Wound up after losing investors fortunes. Business model was chucked out the window post bailout

Crystler - famously made a packed for Peter Lynch after US givt gave a credit line, but in trouble again and back for more handouts after trundling along for a generation

Amberman

nesf wrote: »

In a show of how populism in these times is nothing new the Parliament passed a resolution calling for all the bankers involved to be tied up in sacks full of snakes and tossed into the Thames.

poor snakes...they'd have no chance today. That must be where the saying "crooked as a sack of snakes" comes from....which is used right regular round these here parts, so it is.

Zynks

nesf wrote: »

In a show of how populism in these times is nothing new the Parliament passed a resolution calling for all the bankers involved to be tied up in sacks full of snakes and tossed into the Thames.

If only St. Patrick hadn't scared them away we could do the same here

Saabdub

Here's a few more recent ones:D Two are actualy bail-out takeovers.

In 1971 Richard Nixon created AMTRAK to bail out the railway companies, it essentially nationalized most intercity railway services in the US.

In 1975 the British Government bailed-out and took control of British Motor Holdings and Created British Leyland Ltd.

September 2001 Congress passed a $15 billion bailout for the US airlines.

Saabdub

Amberman

Saabdub wrote: »

Here's a few more recent ones:D Two are actualy bail-out takeovers.

In 1971 Richard Nixon created AMTRAK to bail out the railway companies, it essentially nationalized most intercity railway services in the US.

In 1975 the British Government bailed-out and took control of British Motor Holdings and Created British Leyland Ltd.

September 2001 Congress passed a $15 billion bailout for the US airlines.

Saabdub

Thanks Saabdub for your input...

Amtrak shareholders declined to buy out the US govt in 2002...so that didnt work out too well as far as bailouts go.

British Leyland is gone and airlines have been one of the worst industries to invest in.

Can you think of any that have been successful?

Saabdub

Of course not all bail-outs were carried out by Governments. In 1895 J.P. Morgan organized the bail-out of the US Government by organizing the money to refinance the treasury. In 1907 Morgan organized the bail-out of the Trust Company of America and managed to turn around the banking crisis of 1907.

Saabdub

Saabdub

Amberman wrote: »

Thanks Saabdub for your input...


Can you think of any that have been successful?

Hmmmm, successful company bailouts by Government. I can't think of any. Govts. usually step in when companies are so far gone the private sector has given up. The reasons are political and social, sometimes macro-economic. They rarely work out in the end.

Saabdub