U.S. Can Get Bailouts Right This Time
Terms in the financial crisis were too generous to most companies, but at least one rescue offers a promising template.
Bloomberg, March 23, 2020
Have we learned anything since the 2008-09 bailouts?
A little more than a decade ago, the U.S. was in the midst of wrenching a financial crisis. Many things contributed to the debacle. Government officials took charge, using whatever tools they had at hand, and managed to wrestle the worst of the 2008-09 financial crisis into submission, a saga I described in my book “Bailout Nation.”
The prescription was a 90/10 mix of monetary and fiscal responses.
These remedies brought a heavy dose of unintended consequences: The reliance on monetary policy disproportionately benefited those with capital, leading to big gains in equities and a recovery in residential real estate. Other effects included greater wealth inequality, not to mention the rise of new conspiracy theorists and political opportunists. Around the globe, there was a surge in populism, anti-globalizaton and a disdain for science and expertise.
Past bailouts provide a template for what we should be doing now. The 2020 vintage bailouts should look lees like the bailouts of Citigroup, Wells Fargo, and Bank of America and more like the bailouts of automakers General Motors and Chrysler…