1. Local

What Companies and Industries Received Federal-Government Bailouts in 2008?

By

Question: What Companies and Industries Received Federal-Government Bailouts in 2008?
As the Detroit auto industry appears before Congress hat in hand, it is tempting to compare it to the companies/industries that have already received a federal-government bailout in 2008:

Answer:
  • The American International Group (AIG), a large insurance corporation, was bailed out in September, 2008. The original bailout terms provided AIG with an $85-billion bridge loan. AIG was considered to be a "systematically significiant institution." In other words, its failure could cause a domino effect of consequences. The bailout was enhanced in November through the Troubled Asset Relief Program (TARP) of the $700-billion Emergency Economic Stabilization Act; but the original loan terms were changed, the government bought shares of AIG, and AIG executive compensation was limited.

  • The Emergency Economic Stabilization Act of 2008 was also passed in September, after the AIG bailout. It authorized the Secretary of Treasury to spend up to $700 billion in rescue of the mortgage/financial industry. The relative ease by which the financial industry received help from the federal government is attributed, by some commentators, to the "too big to fail" argument. In other words, letting the financial industry flounder would have far-reaching consequences. Psychologically, the 2008 financial industry benefited from the fact that bank failures formed the heart of the great depression.

  • Citigroup bailout of late November. In addition to monies Citigroup garnered from TARP, the federal government insured some bad assets. Citigroup, a financial-services company, is a much bigger organization than AIG. Again, Citigroup was considered too big to fail, especially after the federal government's failure to save Lehman Brothers earlier in the year resulted in Wall Street panic.

Why does Congress seem so reluctant to rescue the big-three auto companies?

In apparent contrast to the financial sector, commentators have noted that legislators and taxpayers have little empathy for the politically-incorrect, big-three auto companies and their "high-paid" union workers.

More Information

  1. About.com
  2. Local
  3. Detroit
  4. Jobs & Business
  5. Big-Three Bailout
  6. Federal Government Bailouts in 2008 - What Companies and Industries Received Federal Government Bailouts in 2008?

©2014 About.com. All rights reserved.