Bail out Idioms by The Free Dictionary

Debates raged in 2008 over if and how to bail out the failing auto industry in the United States. Those against it, like pro-free market radio personality Hugh Hewitt, saw the bailout as unacceptable. Furthermore, government bailouts are criticized as corporate welfare, which encourages corporate irresponsibility. A bailout occurs when a third party – usually a government or government agency – steps in to save a company or companies by providing them with capital, credit, and other forms of support. A bailout is usually initiated when the consequences of allowing the company or companies to fail would lead to contagion and create even greater systemic risk. In addition to the government, other corporations, private individuals, or non-profit organizations may also get involved.

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2. 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.
3. These conditions are intended to ensure that the company is able to become financially stable and avoid the need for future bailouts.

Automakers 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. In 2010, Ireland bailed out the Anglo-Irish Bank Corporation to the tune of €29.3 billion. Greece received European Union (EU) bailouts which topped the scale at around €326 billion. Other rescues include South Korea in 1997, Indonesia in 1999, Brazil in 1998, 2001, and 2002, and Argentina in 2000 and 2001. 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.

These actions help to prevent the consequences of that business’s potential downfall which may include bankruptcy and default on its financial obligations. The Irish banking crisis of 2008 has similarities to other banking crisis, but it was unique in that it was the first banking crisis in a country that was a member of the eurozone. That made the Irish government and central bank have unique constraints when the crisis struck.[64] The post-2008 Irish economic downturn was also unusually steep. The impact on Irish government credit was so severe that it was forced to seek assistance from the European Union and the IMF. 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.

Bailouts may also come with certain strings attached, such as limitations on executive compensation, debt limits, or increased oversight and accountability measures. These conditions are intended to ensure that the company is able to become financially stable and avoid the need for future bailouts. The risks of a bailout include the possibility of moral hazard, where companies may become reckless and take on too much risk knowing that they will be bailed out if they do fail. Another risk is the cost to taxpayers or other investors who may have to foot the bill for the bailout without seeing much upside. The benefits of a bailout are that it can prevent the collapse of a company or organization and its industry, preserve jobs, and maintain economic stability. This is especially true if a company’s collapse will have ripple effects that can bring about even more corporate failures.

This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional. The FDIC has drawn attention to the problem of post-resolution governance and suggested that a new CEO and Board of Directors should be installed under FDIC receivership guidance. In the United Kingdom, the bank rescue package was even larger, totaling some £500bn.

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Bailouts are typically only for companies or industries whose bankruptcies may have a severe adverse impact on the economy, not just a particular market sector. The cross-border elements of the resolution of globally significant banking institutions (G-SIFIs) were a topic of a joint paper by the Federal Reserve and the Bank of England in 2012. 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. These examples are programmatically compiled from various online sources to illustrate current usage of the word ‘bailout.’ Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors. The EU is currently debating how best to implement the FSB requirements across its banking system and what the appropriate size of that requirement should be. Dating back to the 1580s, the term was used to describe the act of procuring a person’s release from prison by posting bail.

bail someone/something out

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. 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).

bale out Business English

When a company accepts a bailout, it will often see its management team replaced and its debts restructured. The scope of the planned resolution regime was not limited to large domestic banks. The inclusion of FMIs in potential bail-ins is in itself a major departure. The FSB defines those market infrastructures to include multilateral securities and derivatives clearing and settlement systems and a whole host of exchange and transaction systems, such as payment systems, central securities depositories, and trade depositories. That would mean that an unsecured creditor claim to, for example, a clearing house institution or a stock exchange could in theory be affected if such an institution needed to be bailed in.

Also, it is essential to understand, many of the businesses which receive rescue funding will eventually go on to pay back the loans. However, AIG also received aid in ways other than merely financial, which is harder to track. 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. The bailout initially cost about 4% of Sweden’s GDP, later lowered to 0–2% of GDP, depending on the various assumptions if the value of stock that was sold when the nationalized banks were privatized. A form of bail-in was used in small Danish institutions (such as Amagerbanken) as early as 2011.[38] The Dutch authorities converted the junior debt of SNS REAAL in 2013, as part of a privately funded recapitalization. Also, with each new bailout, the record books are reopened, and a new biggest recipient award is updated.

bail out Intermediate English

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. 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. In the late 1980s and the early 1990s, over 1000 thrift institutions failed as part of the savings and loan crisis. In response, the US established the Resolution Trust Corporation (RTC) in 1989. The terms of a bailout will vary on a case-by-case basis; however, there will usually be set conditions or requirements for receiving a bailout, such as a restructuring plan or changes to the company’s management and operations.

The 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, https://1investing.in/ experienced massive loan losses as many people defaulted on their mortgages. The U.S. government has a long history of bailouts going back to the Panic of 1792. 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.

bail out American Dictionary

Although they were still large, they were no longer too big to fail because of the improvements in resolution technology. 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 bail out meaning producers today. A quite different, and rather more profound approach would be to deploy a super special resolution framework that permitted the authorities, on a rapid timetable, to haircut uninsured creditors in a going concern. A bailout is the provision of financial help to a corporation or country which otherwise would be on the brink of bankruptcy.

Ever since then, people have used the term ‘bail out’ to describe the literal or figurative act of coming to someone’s rescue – either physically, financially, or in some other way. 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. During the Panic of 1792, debt from the Revolutionary War led the government to bail out the 13 United States. All content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only.

A company may need a bailout if it is facing severe financial difficulties that threaten its survival, such as mounting debts, declining revenue, or a sudden downturn in the market. A bailout can provide the company with the necessary funds to continue operating, restructure its operations, and pay off its debts. Usually, a company would be bailed out only if allowing it to fail would have significant consequences for the wider economy. 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.