Ending Bailouts, At Last

In 2008, we had a financial crisis. Our government responded once again with bailouts. Bailouts keep existing business going, and most of all protect creditors from losses. The instruments vary, including direct creditor guarantees like deposit insurance, mergers of failing companies with sound ones sweetened with government money or government purchases of bad assets, or government purchases, guarantees, and other efforts to prop up security prices and thereby cover up losses. Since actual or promised (contingent) resources flow from taxpayers to financial market participants, we include all of these interventions as “bailouts.”

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